Morgan Stanley sees current stock market developments in a historical context – and advises investors to act accordingly.
?? 2020 brings with it numerous challenges
?? Morgan Stanley was largely unimpressed by the mixed situation
?? Looking back shows signs of the beginning of a cycle
2020 – year of many challenges
Many people will remember the year 2020 for a long time. Not only the corona pandemic, which caused lockdown measures worldwide and massively burdened the global economy, has left its mark on the stock exchanges. The ongoing trade war between the two largest economies in the world, the US and China, is not letting go of investors around the world. Brexit is also a further determining topic on the international trading floor. In addition, 2020 is an election year in the USA and the outcome of this year’s election is likely to have far-reaching consequences: Will incumbent Donald Trump secure a second term or will there be a change of government in the White House? And if Trump loses – will he actually not recognize this election result, as he already suggested in the run-up?
The fact is: the uncertainties in 2020 are higher than seldom before. Also in terms of the consequences for the financial markets. But for Morgan Stanley 2020 is by no means an exceptional year: the experts at the financial house have identified parallels in historical retrospect – and have given investors a clear recommendation for action.
Are we at the beginning of a new cycle?
Morgan Stanley’s Andrew Sheets explained in a notice to investors MarketWatch’s view of the current situation in the financial markets. In his view, market developments so far have been as if we were at the beginning of a new economic cycle – regardless of the headwinds that 2020 has brought with it so far.
With this in mind, investors should not ignore historical developments and initiate investment strategies at an early stage that will pick up speed when growth and inflation expectations have reached their lowest point, said the expert with a view to the current economic situation.
“We are maintaining our central bias – this cycle is more normal than expected and should be treated as such until proven otherwise,” said Morgan Stanley’s Head of Cross-Asset Strategy, referring to the many tensions that ran through the year has so far brought with it.
2020 – a completely normal year?
To support his thesis, Sheets cites, among other things, the strong development of stocks in emerging markets, including the weaker ones US-Dollar, rising inflation expectations, and the widening gap that is opening between short-term and long-term bond yields. All of these are patterns that were observed at the beginning of previous market rallies, the expert continues.
From this point of view, the Morgan Stanley expert formulates specific recommendations for action for investors. His bank is betting on a 30-year bond, as this term is in his view the most susceptible to growth hopes. For stocks, Sheets advises small-cap stocks and stocks from the banking sector.
Other experts also see potential
Andrew Sheets is not alone in his optimistic assessment of the market situation. Most recently, Loreen Gilbert, an asset manager, optimistic about further developments on the stock exchanges shown. For them, too, the US election, which many observers consider to tip the scales, is no reason to give up their bullish view. Although the economic recovery could be irregular that it will come, the expert has no doubt about that. “You can’t stop the train that’s already moving,” she recently announced.
Finanzen.net editorial team