Morgan Stanley says overpriced growth stocks are the market’s ‘greatest risk’

By: Thomas Franck

  • Chief U.S. Equity Strategist Michael Wilson writes that the brokerage still favors defensive, reliable stock picks and a choosier philosophy as investors look to 2020.
  • “We still think the greatest risk in the equity market remains in growth stocks where expectations are too high and priced,” he tells clients.
  • A healthy nonfarm payrolls print sparked a 337-point surge in the Dow Jones Industrial Average on Friday, with stocks closing just below record highs.

Frothy growth stocks in the equity market remain Wall Street’s biggest risk heading into the final weeks of 2019, according to Morgan Stanley.

Chief U.S. Equity Strategist Michael Wilson wrote in a weekly report to clients that the brokerage still favors defensive, reliable stock picks and a choosier bias in general as investors look to 2020.

“We still think the greatest risk in the equity market remains in growth stocks where expectations are too high and priced,” Wilson wrote. “From a sector standpoint, this is consumer discretionary broadly and expensive software and secular growth stocks.”

“Focus on what you own, not how much,” he added.

The strategist’s advice to steer clear of consumer discretionary stocks comes after equities rallied on Friday to finish the week on a high note.

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