Wall Street warns pullback is coming, but says buy the dip

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.

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.

ADX	10,331	+0.3% (YTD: +9.7%)
DFM	6,166	+0.7% (YTD: +19.5%)
Nasdaq Dubai UAE20	5,125	+0.5% (YTD: +23.1%)
USD : AED CBUAE	Buy 3.67	Sell 3.67
EIBOR	4.2% o/n	4.1% 1 yr
TASI	10,922	+0.7% (YTD: -9.4%)
EGX30	32,254	+1.6% (YTD: +18.5%)
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%)
Chimera JP Morgan UAE Bond UCITS ETF	AED 3.53	0.0% (YTD: +1.4%)
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 DFM rose 0.7% yesterday on turnover of AED 484.7 mn. The index is up 19.5% YTD.

In the green: Al Mal Capital REIT (+6.3%), National International Holding Company (+5.7%) and Dubai Refreshment Company (+5.7%).

In the red: Chimera S&P UAE UCITS ETF (-5.3%), Al Ramz Corporation Investment and Development (-5.0%) and Emirates REIT (-2.3%).

Over on the ADX, rose 0.3% on turnover of AED 868.5 mn. Meanwhile, Nasdaq Dubai was up 0.5%.

CORPORATE ACTIONS-

United Arab Bank approves AED 1.03 bn capital increase: United Arab Bank's board of directors approved a capital increase of AED 1.03 bn, bringing its total issued capital to AED 3.09 bn following its AED 1.03 bn rights issue, which wrapped up on 29 July, according to an ADX disclosure (pdf).