The unexpected rally stock market rally in the U.S. stock market in early 2023 could come to an end as early as this week, after the Federal Reserve raised interest rates for the eighth straight meeting. Michael Wilson, senior U.S. equity market strategist at Morgan Stanley (NYSE:MS), believes.

“We think this dynamic reflects more of a seasonal effect and the closing of short positions after December and last year’s decline in general,” the bank’s analyst team, led by Wilson, said in a report. – In fact, the financials are even worse than expected, especially regarding profitability.”

What is a rally in the stock market? 

Since the beginning of January, the S&P 500 is up 4.6% and the Dow Jones Industrial Average is up 1.7%. The Nasdaq Composite index of high-tech companies jumped 8.9%, the fastest pace for January since 2001.

According to Wilson, such dynamics are excessive, and all positive factors are already built into current quotes.

In particular, the Fed will almost certainly raise interest rates by 25 basis points at the end of its first meeting of the year, which ends Wednesday evening. The Fed leadership has not yet given signals about its readiness to stop raising rates, and it contradicts market expectations, the expert noted.

Earlier strategists at Morgan Stanley warned that the beginning of a recession in the U.S. economy could lead to a decline in U.S. stocks by 22% from their current levels by the end of 2023.

Earlier, we reported that the U.S. stock market index will reach new lows in 2023.