Some of Wall Street’s biggest names are bracing clients for turbulence ahead. Strategists at Morgan Stanley, Deutsche Bank, and Evercore are cautioning that US equities, particularly the S&P 500, look vulnerable to a near-term slide after a blistering rally since April pushed valuations to overheated levels, Bloomberg reports.

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How steep are we talking? Morgan Stanley forecasts a correction of up to 10% this quarter, citing the drag from tariffs on consumers and corporate margins. Evercore sees the potential for an even steeper 15% drop, while Deutsche Bank’s Parag Thatte argues that equities are overdue for at least a modest pullback after more than three months of gains.

The warnings come as US economic data turns shaky: US inflation is ticking higher, job growth is softening, and consumer spending is losing steam. Seasonality is also working against stocks, with August and September historically (for the past 30 years to be specific) the weakest months for the S&P 500, averaging losses of 0.7% each versus a 1.1% monthly gain on average, according to data compiled by Bloomberg.

Buy the dip? Evercore and Deutsche Bank advised investors to stay the course and use any weakness as a buying window, particularly in sectors benefitting from the ongoing AI boom, noting that the long-term bull-cycle remains intact.

MARKETS THIS MORNING-

Asian markets are showing mixed performance this morning, with Japan’s Nikkei and the Shanghai Composite both in the green, up 0.6% and 0.1%, respectively, and the Hang Seng and Kospi in the red.

EGX30

35,254

+1.6% (YTD: +18.5%)

USD (CBE)

Buy 48.36

Sell 48.49

USD (CIB)

Buy 48.37

Sell 48.47

Interest rates (CBE)

24.00% deposit

25.00% lending

Tadawul

10,922

+0.8% (YTD: -9.3%)

ADX

10,331

+0.3% (YTD: +9.7%)

DFM

6,166

+0.7% (YTD: +19.5%)

S&P 500

6,299

-0.5% (YTD: +7.1%)

FTSE 100

9,143

+0.2% (YTD: +11.9%)

Euro Stoxx 50

5,250

+0.1% (YTD: +7.2%)

Brent crude

USD 67.64

-1.6%

Natural gas (Nymex)

USD 3.00

-0.4%

Gold

USD 3,434

0.0%

BTC

USD 113,903

-1.2% (YTD: +21.8%)

S&P Egypt Sovereign Bond Index

884.87

+0.1% (YTD: +13.8%)

S&P MENA Bond & Sukuk

147.50

+0.2% (YTD: +5.4%)

VIX (Volatility Index)

17.85

+1.9% (YTD: +2.9%)

THE CLOSING BELL-

The EGX30 rose 1.6% at yesterday’s close on turnover of EGP 5.4 bn (5.2% above the 90-day average). Local investors were the sole net buyers. The index is up 18.5% YTD.

In the green: Eastern Company (+5.5%), Egyptian Kuwaiti Holding -EGP (+3.4%), and CIB (+2.4%).

In the red: Misr Cement (-4.8%), GB Corp (-1.2%), and Telecom Egypt (-0.8%).

CORPORATE ACTIONS-

Act Financial will distribute a dividend of EGP 0.179 per share for its 2024 earnings, after the company’ general assembly approved the move, according to an EGX disclosure (pdf). Dividends to be paid out to shareholders will total EGP 200 mn.

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