Morgan Stanley IM: Debt Ceiling Theatre vs. Drama: What to Watch for 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.
01.06.2023 | 07:05 Uhr
Sad to say, but the debt ceiling debate, and ‘risk-event’, is all
too frequent an occurrence for markets. While much focus is placed on
issues leading up to the ‘event’, the real market impact is often what
This question has been consuming the narrative in some parts of the
market that implies there is impending ‘liquidity risk’ to the markets
post debt ceiling. SPOILER ALERT: We don’t see it that way.
But, while ‘liquidity’ could be a risk, it’s not our base case.
Perhaps one can take feeble consolation in that there are other things
to worry about.
Post-debt ceiling theatre, consumer strength is where the real
longer term risk lies, what I termed the drama, or perhaps trauma.
Inflation, earnings and profit margins and ultimately/possibly asset
prices may take notice.
The point here is that although market uncertainties still exist, we
are not devoid of well valued investment opportunities. As we like to
say, being balanced is better than being defensive. Fat tails exists on
both sides of the distribution of outcomes, why not incorporate both
instead of just picking one.
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