Morgan Stanley Analyst Opines: Market Meltup is Over

market meltup over morgan stanley

The stock market certainly delivered an exciting start to 2018.

The S&P 500 climbed 7.5% between late December and January 26, when it recorded the last in a string of record closes at 2,872.87. That fateful Friday in January was also the day the Dow Jones Industrial Average reached its record high of 26,616.71.

That may have been the end of a much-anticipated "meltup," which CNBC reporter Sue Chang writes is defined as an unexpected rise in asset prices as a fear of missing out (FOMO) drives investors to surge into the market. Think of it as the opposite of a meltdown. But like a party that gets out of control, what often follows a meltup may be quite a slow clean-up.

One prominent analyst says 2018 peaked early and we shouldn’t expect much growth for the rest of the year.

"We think January was the top for sentiment, if not prices, for the year. With volatility moving higher we think it will be difficult for institutional clients to gross up to or beyond the January peaks," said Michael Wilson, chief U.S. equity strategist at Morgan Stanley Institutional Securities, in his weekly note on March 19, 2018.

"Retail sentiment indicators also look to have peaked in January and we do not see anything on the horizon to get retail investors more bullish than they were following a tax cut."

Economy Grows, But Market Gets the Jitters

As anticipated, on March 21, the Fed raised its benchmark federal-funds rate by a quarter percentage point to between 1.5% and 1.75%. In its statement, the Fed said, "the economic outlook has strengthened in recent months," while noting that household and business fixed investment "have moderated from their strong fourth-quarter readings."

So, while the economy is growing at a brisk pace, rising inflation and the prospect of trade wars by the Trump administration are making investors wary. And talk about market uncertainty. TechCrunch reported that Facebook has lost $60 billion in market cap as a result of allowing a political consultancy inappropriate access to data on 50 million Facebook users, further spooking investors.

With Facebook dragging it down, the Dow dropped 335 points on March 19 while the Nasdaq fell 1.8 percent. As a result, the resulting CNBC headline offered little comfort: "Tech stocks are flashing a warning sign similar to before the dot-com bubble popped."

What This Could Mean for Retirement Planning

No one knows what’s ahead, except for those planning for retirement. They know they will be depending on the funds they have accumulated over a lifetime of hard work. In the spread of the "retirement red zone," or the 10 years just before retirement and 10 years into it, those at this point may also consider ways to protect the retirement lifestyle they have been dreaming of their whole lives.

While we are still in our 20s we begin talking about retiring on a beach with an umbrella drink in our hands. Dreaming of economic abundance in retirement is universal. But actually creating it, especially when we are in the years just before retirement and all it entails -- that requires careful planning and protecting those assets you have diligently built up over decades.

That could make this a pivotal moment for millions of maturing Americans. So, what is a good game plan for someone planning for or approaching retirement in the wake of this new, uncertain market activity?

Taking a breath and consulting with a retirement-knowledgeable financial professional is often the best first step.

According to "Now is a particularly good time to revisit your investment mix to ensure that it is consistent with your tolerance for risk. During the bull market, 'people were getting comfortable with those returns and may have let their stock allocation drift higher,' says Maria Bruno, a senior investment strategist at Vanguard. 'We've been reminding them to rebalance.'"

Lifetime Retirement Income Becomes a Top Priority

So, what's on the menu for working-age individuals for whom retirement is drawing near?

There are many options available to investors who want to rebalance their investments, realign their strategies to their risk tolerance and take a closer look at how they can turn their assets into retirement income that can last as long as they do.

And beyond the obvious financial benefits of creating a plan to generate lifetime income, using annuities and other insurance-backed solutions, not being at the mercy of a potentially volatile stock market pays other benefits.

“Even aside from the obvious financial security that assured monthly income can bring, payouts that are guaranteed not to go down no matter how much the market may fall can also yield valuable emotional and psychological perks,” according to a report on “A variety of studies and surveys show that retirees who have guaranteed income in the form of a pension or annuity tend to be happier in retirement than those who don't.”

Get Started with Retirement Clarity and Guidance

Are you ready to get into the driver's seat of planning for a more financially confident future? Financial professionals at stand ready to help you. 

Use our "Find a Financial Professional" section to connect with a financial professional directly. You can request a no-cost, personal conversation to discuss your goals, situation, and options to achieve a retirement that is meaningful for you. And should you need a personal referral, call us at 877.476.9723.

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