S&P 500 Setting a ‘Trap,’ Morgan Stanley Warns, Shares 3 Trades to

• It’s no longer safe to simply “buy the dip,” says Mike Wilson, Morgan Stanley’s CIO.
• Slowing growth and rising interest rates are a dangerous combination for markets.
• Stocks in the financials, healthcare, and consumer staples sectors should hold up better than peers.

Stocks have been whipsawed in September as a debate rages between bulls and bears over whether the latest market dip is worth buying.

Eighteen months of equities routinely rising has had a numbing effect on many investors, who now seem to reflexively swoop in and add to their portfolio positions when stocks slip. That ‘buying just to buy’ sentiment has flipped in recent weeks, and many market participants now appear to be itching to sell in the face of any perceived threat — legitimate or not. 

Two weeks ago, a concern was seasonal weakness, given that stocks have historically fallen in September. Last week, some investors panic-sold as Evergrande, one of China’s largest property developers, appeared poised for collapse. This week, rapidly rising bond yields are seen as lowering the equity risk premium for stocks and making them relatively less attractive.

A chorus of market experts — from the BlackRock Investment Institute and JP Morgan to others Insider has spoken with — has called the recent weakness in stocks a big buying opportunity. Mike Wilson, chief US equity strategist and CIO for Morgan Stanley, firmly disagrees.