Here’s The Biggest Risk For The Stock Market This Year, According To Morgan Stanley Experts

Here’s The Biggest Risk For The Stock Market This Year, According To Morgan Stanley Experts

Topline

Unprecedented spending by both lawmakers and the Federal Reserve to stave off a pandemic-induced market crash helped drive stocks to new highs last year, but Morgan Stanley experts are worried that the unintended consequences of extra cash and pent-up demand once the pandemic subsides could tank markets this year–quickly and abruptly.

Traders work on the floor of the New York Stock Exchange.



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Key Facts





The biggest market surprise of 2021 could be "higher inflation than many, including the Fed, expect," Morgan Stanley analysts said in a note on Monday, arguing that the Fed's massive spending during the pandemic has moved beyond simply filling holes left by crises and is instead "creating newfound spending that led to the fastest economic recovery on record." 





By using its cash reserves to buy back some $1 trillion in securities, the Fed has created a market that's awash with cash, which typically helps drive inflation, and Morgan Stanley warns that influx could drive up prices once the pandemic subsides and companies scramble to meet pent-up consumer demand.