Morgan Stanley's Shalett Sees S&P Rally Sputtering Amid AI Risks
The furious comeback in US equities from the depths of last month's rout is poised to come to a halt, according to Morgan Stanley's Lisa Shalett.
The chief investment officer of the bank's wealth management division says decelerating revenue growth from the Magnificent Seven megacap companies and waning earnings momentum more broadly will limit further market upside after a double-digit recovery in the S&P 500 Index from April's lows.
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It was even a central component of his 2024 presidential campaign. Suggesting any behind-the-scenes coordination is ridiculous,' a spokesperson for Rep. Marjorie Taylor Greene said, pushing back on concerns around the timing of the trades. The Georgia Republican – whose 11 reported purchases on April 8 included between $1,000 and $15,000 worth of stock each, according to the filings – does not direct her own trades but instead has a fiduciary agreement with her portfolio manager, the spokesperson said. Around Trump's trade war, a number of Republicans publicly pledged support for Trump's economic policy while protecting their own financial interests. Sen. Markwayne Mullin sold between $290,000 and $700,000 in stocks across industries from a joint account on April 8 through 'an independent, third-party operator firm that manages all stock portfolio investments on his behalf,' according to his spokesperson. At the same time, the Oklahoma Republican was publicly supporting the president's escalating trade war, despite the financial decisions that appeared to mirror broader consumer concerns. Hern, the fourth-highest ranking Republican in the House said on February 13, shortly after Trump announced 25% tariffs on steel and aluminum imports from all countries: 'These reciprocal tariffs will incentivize other nations to level the playing field and remove long-standing, exorbitant tariffs.' On March 31 — two days before Trump announced expansive tariffs on April 2 — a trust affiliated with Hern sold between $500,000 and $1 million worth of structured investments. For Rep. Chip Roy of Texas, one of the Republicans behind the push to ban lawmaker stock trading, having an intermediary conduct the trades does little to assuage concern. 'Members of Congress should come here to advance the interests of their constituents, not to enrich themselves using stock trading,' Roy said. Rhode Island Rep. Seth Magaziner, one of the leading negotiators on the Democratic side of the effort to ban congressional stock trading who participates in regular meetings on the issue, similarly told CNN: 'We should eliminate the opportunity for members of Congress to engage in any sort of insider trading because the opportunity clearly exists.' The director of government affairs at the Project on Government Oversight Dylan Hedtler-Gaudette told CNN, 'You occasionally have these moments where it really clarifies and distills down just how bad this is. And I think the tariff announcements and subsequent trades and transactions are a prime example of that.' March 3 — the day before Trump levied an additional 10% tariff on China and a 25% tariff on Mexican and Canadian imports with some exceptions — saw the highest number of lawmakers reporting stock trading in a single day through mid-April, according to CNN's analysis. Sixteen lawmakers, evenly split among Democrats and Republicans, reported hundreds of thousands of dollars' worth of transactions that day — most of them purchases. The president had confirmed at an afternoon White House event on March 3 that the tariffs would take effect the next day, leading to a sharp selloff in stocks. At that point, March 3 had so far been the worst day for the market. Pennsylvania Republican Sen. Dave McCormick, who reported purchases between $50,000 and $100,000, was the only lawmaker to report having personally traded on March 3. McCormick did not respond to multiple requests for comment. Lawmakers reached by CNN sought to distance themselves from the transactions filed during those key dates around Trump's tariffs announcements. CNN reached out to the 16 lawmakers who reported transactions on March 3, and the 35 lawmakers, some of whom overlapped, who reported having transactions between March 31 and April 9. Those who responded to CNN said they were unaware of trades being made through various agreements with financial advisors. They said the filings did not reflect traditional stock trades and that they had no interactions with the administration around key announcements. Some told CNN the filings reflected trades or reinvestments through a joint account or by a spouse. Democratic Rep. Josh Gottheimer is waiting on congressional approval for a blind trust, a spokesman told CNN. GOP Rep. Bruce Westerman, meanwhile, has instructed his investment advisor to not invest in individual stocks and is in the process of putting his assets back into a fund, after receiving heat for recent investments, spokesperson Kinsey Featherston shared. Democratic Rep. Julie Johnson has begun the process of divesting her stocks, managed by an independent third party, into ETFs and mutual funds upon becoming a member of Congress, her spokesperson told CNN. Some said they supported efforts to ban lawmaker trading of individual stocks, even those with active portfolios, including Khanna and GOP Rep. Rob Bresnahan. The STOCK Act passed with overwhelming support in 2012 to increase transparency about lawmaker stock trading and made it illegal for lawmakers to use inside information for financial benefit. But lawmakers and experts argue problems persist with existing reporting structures and enforcement mechanisms. Along with only being required to report a monetary range of transactions, lawmakers also don't report the timing of a trade on a given day, which could be useful context for those determining whether seemingly well-timed trades could be based on non-public information. There is also currently no designated oversight body to determine whether lawmakers hold a conflict of interest in their trading practices. Legal experts say that even lawmakers who use financial advisors to trade on their behalf are not necessarily insulated from scrutiny, and it depends on the details of the agreement. The $200 fine for late filings is hardly a deterrent, experts argue. 'That doesn't pass the sniff test even a little bit because there is no guarantee that they're not talking to those people because there is no prohibition against them from talking to those financial advisors,' Hedtler-Gaudette said of the arrangements most lawmakers have with their financial advisors. As efforts to ban congressional stock trading have fallen short, scholars and ethics experts have argued that members of Congress are privy to more information than the average American and are often faced with legislative decisions that overlap with their investment portfolios. 'It is essentially completely legal for a congressman, congresswoman or senator to go to Goldman Sachs, Blackrock or Vanguard and be like, 'Hey I'm proposing this regulation, what do you think will be the impact on the market?' There is nothing to stop you from that,' said Dr. Jan Hanousek Jr., an assistant professor at the University of Memphis who has studied the patterns of lawmaker stock trading. 'This is an insane problem.' Beyond ethics concerns, a 2022 Fox News poll found that 70% of respondents supported banning members of Congress and their families from trading stock, while a January UC San Diego study found that even when lawmakers make their trading practices public, it 'erodes' the legitimacy of Congress. The push to ban lawmaker stock trading last peaked when dozens of federal officials and some lawmakers made lucrative stock and mutual fund trades as the government was preparing for the financial onslaught of the Covid-19 pandemic in early 2020. The Department of Justice has since closed investigations into the moves. But in a sign this Congress' bipartisan group of lawmakers may be closer to finding the political will to ban the practice, House Speaker Mike Johnson, House Minority Leader Hakeem Jeffries and the president himself have publicly supported the effort, following news of lawmaker stock trading activity around the tariff announcements. 'I have been working on this issue for years,' Roy told CNN. 'We can and should fix the problem during this term now that President Trump and the Speaker have signaled their support for the measure. We have the will and the mandate of the American people to do this. Let's deliver.' CNN's John Towfighi contributed to this report.
