Stock Markets Are Ignoring A ‘Laundry List’ Of Risks, Strategist Says  

• Stock markets are ignoring a “laundry list” of potential risks in their recent bull run, and a big downturn could be incoming, according to Julian Howard, investment director for multi-asset solutions at GAM Investments. Despite the risks associated with a steep rise in interest rates over the past 15 months, tech stocks particularly led the charge so far this year, as investors rushed to gain exposure to the AI boom.
• In light of the latest round of economic data, economists are beginning to increase the probability of further interest rate hikes from the U.S. Federal Reserve, with the U.S. economy and jobs market still resilient, while core inflation is proving stickier than expected.
• Some Fed policymakers had in recent weeks expressed willingness to pause the cycle of rate hikes at the central bank’s June meeting, and the market is now pricing around an 80% chance of this outcome, according to the CME Group FedWatch tool. However, several Fed officials and economists have hinted that further monetary tightening could be needed later in the year.
• Morgan Stanley also predicted in a research note last week that slower real and nominal U.S. growth will lead to sharp downgrades to earnings forecasts, which will slam the brakes on the stock rally stateside. Morgan Stanley strategists said various “big-picture” indicators continued to recommend that investors adopt a “defensive posture.”

(Source: CNBC)