Morgan Stanley IM: Is All News Really Bad News? What May Happen Next in Markets
Jim Caron, Co-Lead Global Portfolio Manager and Co-Chief Investment Officer, Global Balanced Risk Control Team, shares his macro thematic views on key market drivers.
01.03.2023 | 05:40 Uhr
Call us skeptical that all news is bad news. We are also wary of the
rapidly changing narratives that the market is clutching onto as it
swings from one monkey bar to the next.
It's hard to time things perfectly, but we see inflation moving
lower and the narrative for the terminal policy rate to eventually
settle at 5.25%. If there's risk to this view it's to the upside, but
not higher than 5.50%.
Why is this important? Because the sharp selloff in assets is
based on a narrative of rising inflation and tighter policy. If this
proves false, or if a more balanced narrative emerges - let alone one in
which inflation falls (as we think it will) - then we see it as a sharp
positive for asset prices.
Fixed income assets just reset and gave up most of this year's
gains, perhaps making now a better entry point. Near 9% High Yield and
Emerging Market yields do seem attractive for what we think will be a
soft landing with low default risks.
A stabilization of inflation and policy risks may also be friendly
to equity markets. Don't underestimate the high cash levels that will
Once again, a balanced approach like ours, one that allocates across
a combination of stocks and bonds, all within in a risk-controlled
framework, may be ideal for this choppy environment.
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