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10 Market, Other Predictions Tied to Ukraine War: Morgan Stanley's Shalett

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Related: J.P. Morgan’s Kelly, Bilton: 10 Economic Predictions for 2022 and Beyond

Advisors and their clients should remain cautious as market volatility continues on multiple fronts, but investors should stay invested and not exit the market out of fear, according to market commentator Lisa Shalett, chief investment officer for Morgan Stanley Wealth Management.

Speaking on Wednesday at the firm’s second Financial Wellness Retreat, in the session “Making Cents of the Markets,” she said investors should be especially cautious about the bond market, relying on gold as a hedge against inflation and the highly volatile cryptocurrency sector.

The bond market has rarely seen such volatility, she pointed out, calling it “insane” because “we’re literally seeing double-digit basis point yield moves every day.”

“Part of that is this real confusion, I think, and angst among investors,” Shalett said. They “are really kind of thrashing between this idea that the Fed is tightening policy because the economy is very strong and hot and will be able to absorb the rate hikes, and a scenario that’s more cautious — which says this is going to be a mistake, the economy is already slowing, the Fed’s going to make it worse, [and] this war makes it worse.”

We’re also “still not at the point where bond yields have adjusted to compensate investors for the level of inflation,” she said.

Typically, hen there’s volatility in the stock market and stocks are selling off, bonds are rallying and yields are coming down, she said. But stocks and bonds have often moved together recently, she added.

Check out the slideshow above to see her 10 top predictions from the discussion.

(Photo: Bloomberg)