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Morgan Stanley says stocks are due for a drawdown and there are 3 catalysts that may cause it

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The stock market is set up for a potentially rocky start to 2021 after a strong performance last year, according to a client note from Morgan Stanley.

Investors enter the new year with elevated levels of optimism and high valuations on stocks after a 16.3% gain for the S&P 500and a 43.6% gain for the Nasdaq Composite in 2020, and that could make markets susceptible to downside risks, the note from equity strategist Mike Wilson said.