There’s Danger in Market’s Bet for a Soft Landing: Morgan Stanley

Investor speculation that the Federal Reserve will cut rates soon continues to support stock prices, a strategy fraught with risk because it means “things actually are weak,” a Lisa Shalettt Morgan Stanley said on Bloomberg Surveillance.

The market has an “extraordinarily glass half full” view that the central bank will engineer a soft landing of the economy, and investors will “have to cope with the fact that multiples may contract at the same time that earnings begin to fall and that’s a very kind of dangerous combination,” the firm’s chief investment officer for wealth management said.

There are signs from early earnings reports that the bank woes may already be rippling through the economy.