Morgan Stanley strategist Michael Wilson said another sharp rise in oil prices is the biggest risk facing the U.S. stock market right now and recommended energy stocks as a hedge for portfolio risk. Wilson said further gains in oil could push bond yields higher and eventually force the Federal Reserve to respond, as Fed Chair Walsh is seeking to bring inflation back to target. He added that, at that point, more responsibility would fall on the Fed rather than the Treasury, though he does not expect an immediate response before markets go through more turbulence. As part of that view, Wilson pointed to energy equities as a practical way to manage the risk of a renewed surge in oil prices. He also noted that Exxon Mobil Holding Company and Chevron shares have both climbed more than 30% this year, outperforming the S&P 500 by more than two times. More broadly, Wilson reiterated his preference for what he described as high-quality stocks, referring to companies with steadier earnings, higher margins and stronger operating efficiency.
Odaily reported that Morgan Stanley strategist Michael Wilson sees another sharp jump in oil prices as the biggest risk facing U.S. equities and said investors should use energy stocks to hedge portfolio exposure.
Wilson said that if oil keeps rising, it could drive yields higher and eventually force the Federal Reserve to act, as Fed Chair Walsh is trying to bring inflation back to target.
"At that point, more responsibility will fall on the Federal Reserve rather than the Treasury," Wilson said. "We have little doubt that the Fed will ultimately respond, but it may not act until after the market goes through additional turbulence."
He recommended holding energy shares to offset the risk of a possible surge in oil prices.
According to the report, shares of Exxon Mobil Holding Company and Chevron are both up more than 30% this year, more than double the gain of the S&P 500.
Wilson also reiterated a broader preference for what he calls high-quality stocks, meaning companies with more stable earnings, higher profit margins and stronger operating efficiency.
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