Even though the markets had seen some relief by the end of December 2018 and the beginning of January 2019, the signs of relief don’t seem to be a permanent state of events as many economists and market analysts consider that the bear markets have just started to roll out.
That means that the changing liquidity alongside the peaking growth of stocks in the market is indicating a contra-effect that is said to be arriving in form of more drops and declines during 2019.
The industries that are predicted to suffered the most due to the present state of the market and in the long run are said to be Discretionary, Growth and Tech.
Consumer Discretionary Said to Carry a High Risk of Margin Compression
According to one of the latest reports from Morgan Stanley and his equity strategy team, although the sectors of growth, tech and discretionary have previously seen a relief in the market, “the pain is not over” for these industries.
As stated in the report, perhaps the highest risk is noted in Discretionary as vehicles and components, retail industry and consumer apparel and durables are said to be the weakest points in the market.
Furthermore, Morgan Stanley implies that these sectors might be carrying disappointment regarding earnings in the following 12 months, while the three sectors are already in risk most probably due the peaking demand and the pressure of costs.
The fact is, as Morgan stated in his report, that discretionary industry calls for more expansion in terms of economic growth, alongside wage and employment growth, which is why this sector might be at risk in the following period, although Discretionary, Growth and Tech have been “the least impacted by the massive market derating” of 2018.
However, these industries are said to have a big chance of falling further below as 2019 progresses.