Morgan Stanley: "16x PE Is Now A Ceiling, Not A Floor"

Morgan Stanley: "16x PE Is Now A Ceiling, Not A Floor"
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Back in July, Morgan Stanley's chief equity strategist wrote that in a year in which "rolling bear markets" across such assets as volatility, Italian bonds, Chinese stocks, commodities, emerging markets, only a handful of asset classes had remained unscathed: technology stocks, as well as discretionary and growth names. It was the reason why Wilson downgraded tech and growth names at the time.

And, until last week, Discretionary, Growth, and Tech had been among the last holdouts from this "rolling bear market" thesis. That all changed following two days of violent rotations within the market as tech stocks saw a 3.8% decline last week (and about twice that over the last two weeks) with the pain sharpest in Semiconductors. The Russell 1000 growth index plunged ~5% giving up nearly a third of its year to date gains. In addition to Growth stocks and small caps, Materials and Industrials performed very poorly as well and notably didn't recover much during Friday's session. Meanwhile, even though defensive areas were also hit, they were relative outperformers. In short, as Wilson writes in a Monday note, "the rolling bear finally got the last holdouts and in doing so did some pretty severe damage to the entire forest."

Furthermore, while others are "....

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