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Morgan Stanley: "We Are Putting Our Money Where Our Mouth Is And Downgrading Global Stocks To Sell"

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Morgan Stanley: "We Are Putting Our Money Where Our Mouth Is And Downgrading Global Stocks To Sell"

Authored by Andrew Sheets, chief cross-asset strategist at Morgan Stanley

Over recent weeks, you’ve heard us discussing why we think investors should fade the optimism from the recent G20. Why we think bad data should be feared rather than cheered because it will bring more central bank easing. Why we think the market is too optimistic on 2019 earnings and is underestimating the pressure from inventories, labour costs and trade uncertainty.

The time has come to put our money where our mouth is. In light of these concerns and others, we are downgrading our allocation to global equities from equal-weight to underweight.

The most straightforward reason for this shift is simple – we project poor returns: Over the next 12 months, there is now just 1% average upside to Morgan Stanley’s price targets for the S&P 500, MSCI Europe, MSCI EM and Topix Japan (including dividends and equally weighted). If we ignore those targets and estimate returns for those same regions based on current valuations, adjusting for whether returns tend to be better or worse given current economic data, the upside is very similar (3%). There comes a point for every analyst where you need to change your forecast or change your view. We’re doing the latter.

Why are those return estimates so low, especially in light of possible central bank easing? Our economists, after all, are calling for the Federal Reserve to lower rates later this month, and the ECB to embark on a new round of quantitative easing.

Our concern is that the positives of easier policy will be offset by the negatives of weaker growth: We think a repeated lesson for stocks over the last 30 years has been that when easier policy collides with weaker growth, the latter usually matters more for returns. Easing has worked best when accompanied by improving data. If you don’t believe us, we have some European stocks from April 2015, shortly after the ECB’s first QE programme was announced, that we’d like to sell you.

https://www.zerohedge.com/news/2019-07-07/morgan-stanley-we-are-putting-our-money-where-our-mouth-and-downgrading-global

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Morgan Stanley: "We Are Putting Our Money Where Our Mouth Is And Downgrading Global Stocks To Sell"-RIDICULOUS BULLSHIT!!!!

stay with pepe on this explanation- this is the system trying to pull the pin on themselves the closer the FOMC meeting gets. Look what they tell you to buy at the bottom of this article FIXED INCOME-what do they have an ASS-TON of???

The reasons they give are solid (can't argue with them-but shit be different this time, and this time WE are right not them-fuck them)

They are recommending is to dump what brought everyone here, namely equities and plow what you get into bonds.

That will AUTOMATICALLY raise yields and make borrowing moar expensive for everyone. It will also allow the FOMC to stand pat on interest rate raises.

The bond market speaks for the FOMC on this matter, contrary to what everyone thinks. THE FRB/FOMC DOES NOT SET INTEREST RATES, the only thing they do is be the messenger for the bond markets.

In some cases, goldman and ally bank, have already lowered the savings rate they pay out. They are controlling this NOT THE FRB as they own the FRB.

This downgrade will trigger moar of them from other banks and hedge funds.

Remember the rothschilds bet on ALL SIDES so whatver habbens they will win-DON'T FEED THIS GASLIGHTING BULLSHIT.

It might get some downdrafts and you would be a silly pepe to not try and capture some of that but POTUS and crew have brought you this far-TRUST THE MUTHAFUCKING PLAN

Begin article

The time has come to put our money where our mouth is. In light of these concerns and others, we are downgrading our allocation to global equities from equal-weight to underweight.

There comes a point for every analyst where you need to change your forecast or change your view. We’re doing the latter.

Why are those return estimates so low, especially in light of possible central bank easing? Our economists, after all, are calling for the Federal Reserve to lower rates later this month, and the ECB to embark on a new round of quantitative easing.

Our concern is that the positives of easier policy will be offset by the negatives of weaker growth: We think a repeated lesson for stocks over the last 30 years has been that when easier policy collides with weaker growth,

the latter usually matters more for returns. Easing has worked best when accompanied by improving data. If you don’t believe us, we have some European stocks from April 2015, shortly after the ECB’s first QE programme was announced, that we’d like to sell you.

As markets have rallied over the last month, global trade and PMI data have continued to worsen. Global inflation expectations, commodity prices and long-end yields suggest little optimism about a growth recovery. On the back of the G20, our economists downgraded their global growth forecasts. We forecast an aggressive Fed and ECB action because we think growth concerns are material.

Given our disagreement on how much policy easing will help, it’s reasonable to ask: Why not make this change in August, after the Fed cuts? Because we do see two potential nearer-term catalysts: 2Q earnings season and the drop in summer liquidity.

Global PMIs have continued to fall.

And Morgan Stanley’s Business Conditions Index, a survey of how our equity analysts feel about their companies, suffered its largest one-month decline ever in June. We believe all this signals risk to equities.

but you had NO problems with virtually the same scenarios during the hussein administration-again FUCK YOU!

Relative to bonds, stocks do offer a historically elevated equity risk premium (ERP). But we think it’s dangerous to be too sanguine about both these supports. ERP is a valuation measure, and like all such measures it is much better as a multi-year guide than a near-term indicator, being easily swamped by more pressing concerns. Stocks have looked cheap to bonds for almost the entire post-crisis period. That didn’t prevent a number of meaningful draw-downs.

If investors really believe in the power of 'cheapness to bonds' they have an odd way of showing it. Europe, Japan, Value and Cyclicals are the segments of the market cheapest to fixed income. They are also the least-loved. Indeed, while investor positioning may not be particularly extended overall, it looks relatively concentrated in the US, Growth, Quality and Defensives.

For now, we’re putting our money where our mouth is. Following these changes, we are underweight both equities and credit, equal-weight government bonds and overweight cash. Our most preferred asset class remains emerging market fixed income.

https://www.zerohedge.com/news/2019-07-07/morgan-stanley-we-are-putting-our-money-where-our-mouth-and-downgrading-global