Morgan Stanley strategist warns: S&P 500 overvalued by 10%, difficult for Fed rate cuts to solve stock market dilemma

Morgan Stanley's Chief Information Officer and Chief US Stock Strategist, Mike Wilson, has issued a warning that the S&P 500 Index is overvalued by 10%. He believes that the market may remain fragile until it receives positive growth data or more support from the Federal Reserve. The current prices do not yet reflect the support of undervaluation, as the S&P 500 Index is still trading at 20 times forward 12-month earnings forecasts. In addition, the market-leading sectors have shifted to a more defensive posture, indicating a potential early warning signal of a stock market pullback in the rotation of market styles. Valuations this year have reached very high levels, and even an economic soft landing cannot boost the stock market. The market faces a dual challenge of deteriorating economic growth data and the Federal Reserve's reluctance to cut interest rates