Financial safety

Morgan Stanley breaks with rest of Street, thinks October sell-off is 'morphing' into a bear market

Morgan Stanley disagrees with the rest of Wall Street: The bank's top strategists are gearing up for a much longer bear market while others are betting the sell-off is short-lived.

"The rolling bear market continues to make progress and there is growing evidence that it is morphing into a proper cyclical bear market in the context of a secular bull," wrote Michael Wilson, the bank's chief equity strategist. "We think the evidence is building and the message from Mr. Market is clear: the consensus outlook for earnings growth is too rosy next year."

Strategists on Wall Street refer to bear markets that are shorter in duration as "cyclical."

Morgan Stanley is concerned that actions by the Federal Reserve and other central banks are drying up liquidity more than most market participants predicted, putting stocks in a precarious position. The Fed, which influences the financial markets by adjusting the overnight lending rate, has hiked interest rates three times this year and is widely expected to do so again in December.