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The S&P 500 will likely struggle to make more headway after rallying almost 14% so far this year as investors start to question the sustainability of the U.S. economy’s resilience, Morgan Stanley equity strategists said.

One reason is that a “sell-the news” mentality has taken hold following second-quarter earnings, potentially slowing price momentum, said Morgan Stanley strategists, led by Michael Wilson.

“We find it very difficult to be bullish on the (S&P 500) index.”

The index has fallen over 5% from this year’s highs hit last month, with investors unnerved by a recent surge in bonds yields. The yield on the benchmark 10-year U.S. Treasury is at its highest level since October last year.

“While limited in downside magnitude, this recent price action is a change and suggests stocks may be starting to question the sustainability of the economic resiliency we experienced in the first half of the year,” said Wilson.

“As an aside, the earnings results have not kept pace with the economy this year outside of a few areas.”

Wilson also sees fading tailwinds from excess savings among consumers, which leaves consumer discretionary stocks vulnerable.

The S&P consumer discretionary index, among the best performing sub-indexes this year, is up 28% year-to-date, despite some chunky decline in recent sessions.

Barclays notes that consumers will likely deplete their savings made during the COVID-19 pandemic by January of February of next year.

But instead of suddenly lowering their consumption, “we assume ... that households will gradually return to their pre-pandemic spending patterns,” said Barclays economists led by Marc Giannoni said.

Additionally, Credit Suisse has highlighted difficult-to-quantify downside risks from some external shocks such as those around China’s real estate sector.

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