Morgan Stanley strategists led by Michael Wilson conclude a plunge of over 20% in US stocks is looking more like a real possibility, according to a report by Bloomberg on Monday.

  • Even though it is still a worst-case scenario, the bank stated that the evidence is pointing out weaker growth and declining consumer confidence.
  • In a note published on Monday, the strategists revealed two directions for US markets, which they described as “fire and ice.” In the fire outcome, the most optimistic view, the Fed pulls away stimulus to maintain the economy from running too hot.
  • But it’s the more bearish “ice” scenario that’s gaining attention, says the strategists, pointing out a view that the economy sharply decelerates and earnings get smothered.

On Monday, stocks declined globally on concern that the debt crisis at China Evergrande Group could adversely impact the wider financial system.  US futures signaled a drop of nearly 1% at the market open. S&P 500 down -1.61%, EUR USD down -0.04%