Economy

The strength of the US dollar has created an โ€œunsustainableโ€ situation and threatens a financial crisis – Morgan Stanley

The strength of the US dollar has created an โ€œunsustainableโ€ situation and threatens a financial crisis – Morgan Stanley

NEW YORK (Reuters) – The recent rally in the U.S. dollar has created an โ€œunsustainable situationโ€ for riskier assets that could end in a financial or economic crisis, strategists said at Morgan Stanley (NYSE ๐Ÿ™‚ warned in a note on Monday.

It hit a two-decade high on Monday as the pound hit an all-time low against the dollar.

Extreme currency volatility is another pressure on the global economy and corporate earnings, which are expected to fall as Fed rate hikes over the summer begin to weigh on spending.

Analysts including Morgan Stanley’s Michael Wilson wrote: “Equity bottoms, and highs for returns, are more likely to be determined by the growth trajectory of earnings and the economy than by inflation or the Fed.”

The company said pressures from a stronger dollar will help propel the market to a new bear market low between 3,000 and 3,400 by early 2023.

The S&P 500 fell 1% on Monday and is close to its lowest level in the year.

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