Morgan Stanley Warns of Potential Stock Correction amidst US-China Trade Tensions
NEW YORK - A resurgence of trade war anxieties between the United States adn China could trigger a sharper downturn in the stock market than currently anticipated, according to Morgan Stanley’s chief equity strategist, Adam Wilson. The warning comes after President Donald Trump threatened to impose an additional 100% tariff on Chinese goods and restrict exports of basic software starting November 1, sending shockwaves through US markets on Friday.
Wilson cautioned that if trade-related uncertainty persists into early November, investors could face a correction exceeding expectations. He projects a potential decline for the Standard & Poor’s 500 index to a range of 5,800 to 6,027 points – representing an 8% to 11% drop from last Friday’s closing value. This potential pullback follows a period of record gains fueled by investor enthusiasm for artificial intelligence stocks,which saw notable reversals on Friday,with the S&P 500 falling 2.7% and the Nasdaq 100 dropping 3.5%.
The market’s initial reaction to Trump’s tariff proclamation underscored the sensitivity of equities to escalating trade disputes. However, stock index futures rebounded on Monday following signals from the White House indicating a willingness to negotiate a deal with Beijing. Despite the momentary relief, Wilson maintains a cautious outlook, emphasizing that his base-case scenario hinges on a gradual economic recovery contingent upon easing trade tensions by 2026.
Wilson believes the current escalation is highly likely a “tactical” move and anticipates eventual de-escalation, strong enough to withstand short-term volatility. Still, the potential for a more considerable correction remains if uncertainty lingers, highlighting the ongoing risks posed by the US-China trade relationship to global financial markets.
