According to TechFlow, Morgan Stanley Chief Investment Officer Mike Wilson pointed out that the breadth of the U.S. stock market hit a record low in December, which coincided with the 10-year U.S. Treasury yield breaking through 4.5%, indicating that the Federal Reserve may not be able to provide the loose policy expected by the market.
Wilson analyzed that the disconnect between market breadth and prices is similar to that in 1999, mainly due to ample liquidity. As the scale of reverse repurchase shrinks from the peak of US$2.5 trillion, the Federal Reserve may cut interest rates slightly and may face liquidity tightening in early 2024.
He advises investors to focus on high-quality stocks, as profitless growth stocks and low-quality cyclical stocks may be hit hard. Due to the lack of mean reversion, investors tend to follow price trends, resulting in extreme market concentration, and the "quality" factor becomes a stock selection criterion.
