Morgan Stanley IM: The Soft-Landing Super Bowl: Here’s Our Playbook
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.
08.02.2023 | 08:06 Uhr
If we can make the analogy between economic data releases competing
to create the narrative of the market and a football game, then last
week was the Super Bowl.
The winner? The side that supported a soft landing. In fact, Fed
Chairman Jerome Powell delivered that message as such in his presser
Now what? The consensus is pushing the previous expectation
for a softening of market prices from the first half of 2023 into the
second half. This was the big change based on last week’s data.
In simple terms, we’ve gone from a ‘‘dip, then rip” scenario to
“rip, then dip” for market prices. Importantly, the consensus is not
ceding an economic and market swoon at least at some point this year.
We’ve been consistent about where we stand on this, believing
investors are holding too much cash, essentially underinvested and
vulnerable to a market rally. This provides a technical advantage for
the market to overemphasize positive economic data and push prices
As we’ve said before, “risk-on” is a risk, and like any other risk
needs to be hedged. The market is now vulnerable to chase prices higher.
But it’s not just about the technicals. Fundamentals matter too.
Last week’s economic data was a turning point for many to change their
Remember too though that correlations across asset classes remain
high, a risk that need to be addressed. As we like to say it’s better to
be balanced than defensive, and portfolio construction is the key.
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