Warning Of A Big Sell Off
Warning Of A Big Sell Off
Douglas A. McIntyreMon, September 21, 2026 at 2:02 PM UTC
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Morgan Stanley warns the S&P 500 could fall 7% to 7,100 as bond yields near 5% make equities less attractive to investors.
Diesel prices drive persistent inflation through the broader economy, with 70% of U.S. freight moving by truck amplifying the pressure.
AI stocks face twin risks: a single major security breach or a pullback in corporate spending could erase the sector's market momentum.
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Morgan Stanley has warned that the market faces a 7% selloff. "Should the correction in valuation take a turn for the worse in the near term due to a further tightening of financial conditions and/or materially higher energy prices, we think the S&P 500 could trade as low as 7,100 before the bull market resumes into year end.”
The reasons for the selloff are fair enough. One is that as some bond yields hit 5%, they will be more attractive than stocks. It would not take much of a dent in worry about AI stocks, in particular, to cause investor anxiety.
Another, broader reason is that oil prices will continue to rise. This is not just a problem for America’s drivers, those who drive diesel-powered trucks, and those who use home heating oil. Petroleum is used across the manufacture of hundreds of products. Eventually, oil’s increase seeps through much of the economy. (One other factor is how long the oil shortage will last as the Middle East catastrophe continues.)
There have been selloffs before in the last year. Optimism, particularly about AI's effects on the economy and tech earnings, has brought the market back. But AI is under siege for two reasons. The first is a less dramatic outcome than “killing mankind.” Short of that, it could seriously damage online security, the grid, or parts of the military. It would not have to be an apocalyptic event.
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On the other hand, AI could become a troubled industry. Resistance to data systems or a cutback in corporate AI spending would make tech stocks, which have carried the market higher, vulnerable.
The fact is that there are nearly as many reasons for the market to drop as to rise, at least for the next several months. Oil prices could shoot up or drop fast. AI valuations only need one big hack to disrupt an entire industry.
A look at every angle probably puts inflation higher than an AI flameout. Even with lower support for data centers, as builders find locations, capital is available. And if AI has continued runaway demand, the public companies at the core of the expansion, and those that will become public soon, have unbelievable momentum. It is not the kind that disappears in a quarter.
Inflation, on the other hand, is persistent and already working its way through the system. The price of gas will cut into consumer spending and that will hit GDP. Diesel prices have already put more inflation into the system. Diesel supplies continue to fall. Seventy percent of American freight goes by truck.
If the market dives, blame a higher cost of living.
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Source: “AOL Money”
