Morgan Stanley Analysts ‘Not That Concerned’ About Omicron Variant, Worried About Federal Reserve Policy
Morgan Stanley analysts cautioned that the Federal Reserve’s forthcoming withdrawal of monetary stimulus is more concerning than the Omicron coronavirus variant.
Last month — following nearly two years of aggressive quantitative easing after COVID-19 and the lockdown-induced recession — the Fed announced plans to taper its $120 billion in monthly bond purchases by $15 billion in both November and December. However, the central bank has been eyeing a faster pullback of monetary aid in response to high inflation and an improving labor market.
Fox Business reported:
The newest coronavirus variant may have fueled stock-market volatility in recent days, but Morgan Stanley analysts are arguing that stock investors should be more concerned about the Federal Reserve and its newfound response to the “on fire” economic data.
In a note to clients, the strategists — led by Michael Wilson — said they are “not that concerned about omicron as a major risk factor for equities,” but warned of possible headwinds after Fed Chairman Jerome Powell last week suggested the U.S. central bank may accelerate its withdrawal of pandemic support for the U.S. economy.
“Tapering is tightening for the markets and it will lead to lower valuations like it always does at this stage of any recovery,” the analyst note said.
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