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|12 March, 2019

Robust global growth scenario seen overpriced – Morgan Stanley

Market participants are dismissing the “tails” where global economic expansion recovers more resiliently

A sign is displayed on the Morgan Stanley building in New York U.S., July 16, 2018.

A sign is displayed on the Morgan Stanley building in New York U.S., July 16, 2018.

REUTERS/Lucas Jackson

While global economic growth may stabilise, with inflationary pressure remaining absent and central banks refraining from raising interest rates for the next 24 months, markets seem to overestimate such scenario, Morgan Stanley said.

“The market is too confident in a central scenario,” the US bank’s strategists said, advising investors not to “buy into Goldilocks.” Goldilocks is a description for the scenario of robust but non-inflationary growth.

Simultaneously, market participants are dismissing the “tails” where global economic expansion recovers more resiliently with Chinese stimulus measures or the notably weak earnings in the first quarter had a bigger impact on markets, according to the strategists.

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In addition, major market reversals, including a cyclical peak for the US dollar, outperformance in emerging-market assets, are expected by the bank’s strategists.

This year would witness “a turning point in macro,” the strategists said, expecting “challenges to all parts of the market’s narrative here, across growth, inflation and policy expectations,” they noted.

 

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