Alle afleveringen
1.740 afleveringen, van nieuw naar oud
-
What’s Next for Japan After Rate Hike?
22 augustus 2024 · 9 min
The Bank of Japan jolted global markets after its recent decision to raise interest rates. Our experts break down the effects the move could have on the country’s economy, currency and stock market. Lees meer
----- Transcript -----
Chetan Ahya: Welcome to Thoughts on the Market. I'm Chetan Ahya, Morgan Stanley's Chief Asia Economist.
Daniel Blake: And I'm Daniel Blake, from the Asia Pacific and Emerging Market Equity Strategy Team.
Chetan Ahya: On this episode of the podcast, we will cover a topic that has been a big concern for global investors: Japan's rate hike and its effect on markets.
It's Thursday, August 22nd at 6pm in Hong Kong.
On July 31st, Japan's central bank made a bold move. For only the second time in 17 years, it raised interest rates. It lifted its benchmark rates to around 0.25 percent from its previous range of 0 to 0.1 percent. And at the press conference, BOJ Governor Ueda struck a more hawkish tone on the BOJ rate path than markets anticipated. Compounded with investors concern about US growth, this move jolted global equity markets and bond markets. The Japan equity market entered the quickest bear market in history. It lost 20 percent over three days.
Well, a lot has happened since early August. So, I'm here with Daniel to give you an update.
Daniel Blake: Chetan, before I can give you an update on what the market implications are of all this, let's make sense of what the macro-outlook is for Japan and what the Bank of Japan is really looking to achieve.
I know that following that July monetary policy meeting, we heard from Deputy Governor Uchida san, who said that the bank would not raise its policy rates while financial and capital markets remain unstable.
What is your view on the Bank of Japan policy outlook and the key macro-outlook for Japan more broadly?
Chetan Ahya: Well, firstly, I think the governor's comments in the July policy meeting were more hawkish than expected and after the market's volatility, deputy governor did come out…
-
At Political Conventions, Policy Waits in the Wings
21 augustus 2024 · 3 min
This week’s Democratic National Convention in the US may be light on policy details, but our Global Head of Fixed Income and Thematic Research explains that the party’s economic agenda is fairly clear as the elections draw closer. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about what investors need to know about U.S. political party conventions.
It's Wednesday, Aug 21st at 10:30am in New York.
This week, the Democratic Party is meeting in Chicago for its National Convention. Conventions for major political parties typically feature speeches from key policymakers, both past and present. So it would seem to be a forum where someone could learn what policies the party plans to implement if it takes control of the government following the November election. But you should expect more political messaging than policy signal.
That’s because the focus of these conventions tends to be more about persuading voters – and that means key policy details typically take a back seat to statements of political values widely shared by the party in order to send a consistent public message. In that sense, an observer may not learn much new about where there’s party consensus on key policy details that markets care about, including specific new taxes that might be implemented, which tax breaks might be extended, how these choices might affect the deficit, and more. That in turn means we may not learn much about what policies could plausibly be implemented if Democrats win the White House and Congress in the November election.
The good news is that we don’t think a convention is required to have a good sense about this. We’ve previously done the work on the plausible policy path resulting from a Democratic victory by examining statements of elected officials and filtering for areas of consensus …
-
Special Encore: Almost Human: Robots in Our Near Future
20 augustus 2024 · 4 min
Original release date July 23, 2024: Our Head of Global Autos & Shared Mobility discusses what makes humanoid robots a pivotal trend with implications for the global economy. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Adam Jonas, Morgan Stanley’s Head of Global Autos & Shared Mobility. Today I’ll be talking about an unusual but hotly debated topic: humanoid robots.
It’s Tuesday, July 23rd, at 10am in New York.
We've seen robots on factory floors, in displays at airports and at trade shows – doing work, performing tasks, even smiling. But over the last eighteen months, we seem to have hit a major inflection point.
What's changed? Large Language Models and Generative AI. The current AI movement is drawing comparisons to the dawn of the Internet. It’s begging big, existential questions about the future of the human species and consciousness itself. But let’s look at this in more practical terms and consider why robots are taking on a human shape.
The simplest answer is that we live in a world built for humans. And we’re getting to the point where – thanks to GenAI – robots are learning through observation. Not just through rudimentary instruction and rules based heuristic models. GenAI means robots can observe humans in action doing boring, dangerous and repetitive tasks in warehouses, in restaurants or in factories. And in order for these robots to learn and function most effectively, their design needs to be anthropomorphic.
Another reason we're bullish on humanoid robots is because developers can have these robots experiment and learn from both simulation and physically in areas where they’re not a serious threat to other humans. You see, many of the enabling technologies driving humanoid robots have come from developments in autonomous cars. The problem with autonomous cars is that you can't train them on public roads without directly involving innocent civilians – pedestrians, children and cyclists -- into that experiment.
Add to all of…
-
Why Immigration Matters for Global Economies
19 augustus 2024 · 4 min
Our Global Chief Economist explains what stricter immigration policy in key markets around the world could mean for economic growth and inflation. Lees meer
----- Transcript -----
Seth Carpenter: Welcome to Thoughts on the Market. I'm Seth Carpenter Morgan Stanley's Global Chief Economist. Along with my colleagues, bringing you a variety of perspectives, today I'll discuss a key driver of the global economy, migration.
It's Monday, August 19th at 10am in New York.
Migration has always been an important feature of the global economy.
Not surprisingly, migrants typically move from lower income countries to higher income countries and for more than 50 years, it has added something like three-tenths of a percent per year to the growth of high-income economies. But in recent years, migration trends have been hit by a couple of major events.
One was COVID. International travel restrictions during the pandemic slowed, or stopped, migration for a while. Despite a strong rebound over the past two years, many economies still have not fully recovered to pre-COVID migration trends. Another is geopolitical unrest. The Ukrainian refugee crisis, for example, is the largest population displacement in Europe since WWII with increasingly global repercussions.
But how does immigration affect economies? One way that I frame the discussion is that immigration can boost both aggregate supply and aggregate demand. It's likely some of each -- and the relative importance of those two affects how inflationary or disinflationary the phenomenon is.
In 2023, with a very large influx of immigrants into the US labor market, the economy was able to grow rapidly while still seeing inflation fall. The supply effect dominated the demand effect. In Australia, by contrast, with more of the immigrants in school or otherwise not in the labor market, prices -- especially for housing -- have gone up because demand was relatively more important.
But some of the effects will only play out over time. Across m…
-
Strong Balance Sheets, Cautious Boardrooms
16 augustus 2024 · 4 min
Our Head of Corporate Credit Research explains how corporate balance sheets have remained resilient post-COVID, and why that could continue in the face of a potential economic slowdown. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Andrew Sheets, head of Corporate Credit Research at Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, today I'll discuss how corporate balance sheets are in a better place to handle a potential growth slowdown.
It's Friday, August 16th at 2pm in London.
Much of the volatility over the last several weeks has been centered around fears that excessively high interest rates from the Federal Reserve will now cause the US economy to slow too quickly. Morgan Stanley’s economists are more optimistic and believe that the data will hold up, leading the Fed to start a gradual rate cutting cycle in September, rather than a more radical course-correction. Against this backdrop, good economic data is good for markets and vice versa.
But even though we remain optimistic at Morgan Stanley about a soft landing in the US economy, our economists still expect growth to slow. How prepared are corporate balance sheets for that slowing, and how worried should we be that this could lead to higher rates of default?
A good place to start is thinking about how optimistic companies were heading into any slowdown of the economy. Overconfidence is often the enemy of credit investors, as rose-tinted glasses can lead companies to make too many unwise acquisitions or investments, funded with too much debt.
Yet across a variety of metrics, this isn’t what we see. Despite some of the lowest interest rates in human history, the level of debt to cash-flow for US and European companies has been pretty stable over the last five years. Excess capital held by banks remains historically high. And Merger and Acquisition activity, another key measure of corporate confidence, remains well below the long run trend – even after a …
-
Will the US Dollar Remain Strong Post-Election?
15 augustus 2024 · 8 min
Our US Public Policy and Currency experts discuss how different outcomes in the upcoming U.S. elections could have varying effects on the strength of the dollar. Lees meer
----- Transcript -----
Ariana Salvatore: Welcome to Thoughts on the Market. I'm Ariana Salvatore from Morgan Stanley's U.S. Public Policy Research Team. And I'm
Andrew Watrous: And I'm Andrew Watrous, G10 Currency Strategist.
Ariana Salvatore: On this episode of the podcast, we'll discuss an issue that's drawing increasing attention from investors leading up to the U.S. election -- and that is the U.S. dollar and how a Harris or Trump administration could impact it.
It's Thursday, August 15th at 10am in New York.
Earlier this year, Morgan Stanley experts came on this show to discuss the current strength of the US dollar, which has had quite a historic run.
Now we all know there are numerous ways in which politics could affect the currency. But before we get into the details there, Andrew, can you just set the stage here a little bit and give some context to listeners on where the dollar is right now and what's been driving that performance?
Andrew Watrous: Yeah, the dollar's been rising this year. So, if you look at a trade weighted gauge of the US dollar, it's up about 3 percent, so far. And part of that US dollar strength is because growth expectations for the US have risen since January. There's a survey of Wall Street economists, and if you look at their median forecast for the US growth, it's moved up about one percentage point since January.
And as a result of that strong US growth, we've seen Fed policy expectations move higher. We started this year with the market pricing the Fed to be below 4 percent by December. And that expectation for where the Fed is going to be in December has moved up about 1 percentage point since January.
So, robust US growth and a higher near-term Fed policy rate expectation have made the US more attractive as an investment destination. And that's boosted the US…
-
Can Vacant Offices Help Solve the US Housing Crisis?
14 augustus 2024 · 4 min
The rise in unused office space has triggered suggestions about converting commercial real estate into residential buildings. But our US Real Estate Research analyst lists three major challenges. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Adam Kramer, from the Morgan Stanley U.S. Real Estate Research team. Along with my colleagues bringing you a variety of perspectives, today I’ll discuss a hot real estate topic. Whether the surplus of vacant office space offers a logical solution to the national housing shortage.
It’s Wednesday, August 14, at 10am in New York.
Sitting here in Morgan Stanley’s office at 1585 Broadway, Times Square is bustling and New York seems to have recovered from COVID and then some. But the reality inside buildings is a little bit different.
On the one hand, 14 percent of U.S. office space is sitting unused. Our analysis shows a permanent impairment in office demand of roughly 25 percent compared to pre-COVID. And on the other hand, we have a national housing shortage of up to 6 million units. So why not simply remove obsolete lower-quality office stock and replace it with much-needed housing? On the surface, the idea of office-to-residential conversion sounds compelling. It could revitalize struggling downtown areas, creating a virtuous cycle that can lead to increased local tax revenues, foot traffic, retail demand and tourism.
But is it feasible?
We think conversions face at least three significant challenges. First, are the economics of conversion. In order for conversions to make sense, we would need to see office rents decline or apartment rents rise materially – which is unlikely in the next 1-2 years given the supply dynamics — and office values and conversion costs would need to decline materially.
Investors can acquire or develop a multifamily property at roughly $600 per square foot. Alternatively, they can acquire and convert an existing office building for a total cost of nearly $700 per square foot, on …
-
US Election Should Not Dim M&A Resurgence
13 augustus 2024 · 3 min
Our US Public Policy Strategist expects a robust M&A cycle, regardless of the outcome of the US election. But rising antitrust concerns could create additional scrutiny on possible future deals. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Ariana Salvatore, from Morgan Stanley’s US Public Policy Research Team. Along with my colleagues bringing you a variety of perspectives, today I’ll talk about the impact of the US election on M&A.
It’s Tuesday, August 13th, at 10am in New York.
2023 saw the lowest level of global mergers and acquisitions – or M&A – in more than 30 years, relative to the overall size of the economy. But we believe that the cycle is currently reversing in a significant way and that politics won't halt the "Return of M&A."
Why? Because M&A cycles are primarily driven by broader factors. Those include macroeconomics, the business cycle, CEO confidence and financing conditions. More specifically, unusually depressed volumes, open new issue markets, incoming rate cuts and the bottom-up industry trends are powerful tailwinds to an M&A recovery and can offset the political headwinds.
So far this year we’ve seen an increase in deal activity. Announced M&A volume was up 20 per cent year-over-year in the first half of [20]24 versus [20]23, and we continue to expect M&A volumes to rise in 2024 as part of this broader, multi-year recovery.
That being said, one factor that can impact M&A is antitrust regulation. Investors are reasonably concerned about the ways in which the election outcome could impact antitrust enforcement – and whether or not it would even be a tailwind or a headwind. If you think about traditional Republican attitudes toward deregulation, you might think that antitrust enforcement could be weaker in a potential Trump win scenario; but when we look back at the first Trump administration, we did see various antitrust cases pursued across a number of sectors.
Further, we’ve seen this convergence between Republicans an…
-
Pay Attention to Data, Not Market Drama
12 augustus 2024 · 5 min
Recent market volatility has made headlines, but our Global Chief Economist explains why the numbers aren’t as dire as they seem. Lees meer
----- Transcript -----
Seth Carpenter: Welcome to Thoughts on the Market. I'm Seth Carpenter, Morgan Stanley's Global Chief Economist. Along with my colleagues, bringing you a variety of perspectives, today I'll be talking about central banks, the Bank of Japan, Federal Reserve, data and how it drove market volatility.
It's Monday, August 12th at 10am in New York.
You know, if life were a Greek tragedy, we might call it foreshadowing. But in reality, it was probably just an unfortunate coincidence. The BOJ's website temporarily went down when the policy announcement came out. As it turns out, expectations for the BOJ and the Fed drove the market last week. Going into the BOJ meeting consensus was for a September hike, but July was clearly in play.
The market's initial reaction to the decision itself was relatively calm; but in the press conference following the decision, Governor Ueda surprised the markets by talking about future hikes. Some hiking was already priced in, and Ueda san's comments pushed the amount priced in up by another, call it 8 basis points, and it increased volatility.
In the aftermath of that market volatility, Deputy Governor Yoshida shifted the narrative again, by stressing that the BOJ was attuned to market conditions and that there was no fundamental change in the BOJ's strategy. But this heightened attention on the BOJ's hiking cycle was a critical backdrop for the US non farm payrolls two days later.
The market knew the BOJ would hike, and knew the Fed would cut, but Ueda san's tone and the downside surprise to payrolls ignited two separate but related market risks: A US growth slowdown and the yen carry trade.
The Fed's July meeting was the same day as the BOJ decision, and Chair Powell guided markets to a September rate cut. Prior to July, the FOMC was much more focused on inflation after the upside s…
-
Rate Cut Ripple
9 augustus 2024 · 4 min
As markets adjust to global volatility, our Head of Corporate Credit Research considers when the Fed might choose to cut interest rates and how long the impacts may take to play out. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Andrew Sheets, head of Corporate Credit Research at Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, today I'll discuss the market’s expectation for much larger rate cuts from the Federal Reserve, and how much that actually matters.
It's Friday, August 9th at 2pm in London.
Markets have been volatile of late. One of the drivers has been rising concern that the Fed may have left interest rates too high for too long, and now needs to more dramatically course-correct. From July 1st through August 2nd, the market’s expectation for where the Fed’s target interest rate will be in one year’s time has fallen by more than 1 percent.
But…wait a second. We’re talking about interest rates here. Isn’t a shift towards expecting lower interest rates, you know, a good thing? And that seems especially relevant in the recent era, where strong markets often overlapped with fairly low interest rates.
Zoom out over a longer span of history, however, and that’s not always the case.
Interest rates, especially the rates from the Federal Reserve, are often a reflection of economic strength. And so high interest rates often overlap with strong growth, while a weak economy needs the support that lower rates provide. And so if interest rates are falling based on concern that the economy is weakening, which we think describes much of the last two weeks, it’s easier to argue why credit or equity markets wouldn’t like that outcome at all.
That’s especially true because of the so-called lag in monetary policy. If the Fed lowered interest rates tomorrow, the full impact of that cut may not be felt in the economy for 6 to 12 months. And so if people are worried that conditions are weakening right now, they’re going to …
-
Health Care for Longer, Healthier Lives
8 augustus 2024 · 4 min
Our Head of Europe Sustainability Research discusses how rising longevity is revolutionizing our fundamental approach from reactive to proactive treatment. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Mike Canfield, Morgan Stanley’s European Head of Sustainability Research. Along with my colleagues, we’re bringing you a variety of perspectives; and today we’re focusing on a topic that affects everyone – how much does poor health cost us? And how are ageing populations and longer life expectancy driving a fundamental shift in healthcare?
It’s Thursday, August the 8th, at 4pm in London.
As populations age across the developed world, health systems need to help people live both longer and healthier. The current system is typically built around to focus on acute conditions and it’s more reactive; so it introduces clinical care or drugs to respond to a condition after it’s already arisen, rather than keeping people healthy in the first instance. So increasingly, with the burden of chronic disease becoming by far the greatest health and economic challenge we face, we need to change the structure of the healthcare system.
Essentially, the key question is how much is poor health amongst the ageing population really costing society? To get a true sense of that, we need to keep in mind that workers over 50 already earn one out of every three dollars across the G20 regions. By 2035, they're projected to generate nearly 40 per cent of all household income. So with that in mind, preventable conditions amongst those people aged 50-64 at the moment, are already costing G20 economies over $1 trillion annually in productivity loss. And there’s one more key number: 19 per cent. That's how much age-diverse workforces can raise GDP per capita over the next thirty years, according to estimates from the Organization for Economic Co-operation and Development, or OECD. So clearly, keeping workers healthier for longer underpins a more productive, more efficient, and a…
-
What This Roller Coaster Week Means for Bonds
8 augustus 2024 · 5 min
Our Global Head of Thematic and Fixed Income Research joins our Chief Fixed Income Strategist to discuss the recent market volatility and how it impacts investor positioning within fixed income. Lees meer
----- Transcript -----
Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research.
Vishy: And I am Vishy Tirupattur, Morgan Stanley's Chief Fixed Income Strategist.
Zezas: And on this episode of Thoughts on the Market, we'll talk about the recent market volatility and what it means for fixed income investors.
It's Wednesday, August 7th at 10am in New York.
Vishy, on yesterday's show, you discussed the recent growth of money market funds. But today I want to talk about a topic that's top of mind for investors trying to make sense of recent market volatility. For starters, what do you think tipped off these big moves across global markets?
Vishy: Mike, a confluence of factors contributed to the volatility that we've seen in the last six or seven trading sessions. To be clear, in the last few weeks, there have been some downside surprises in incoming data. They were capped off by last Friday's US employment report that came in soft across the board. In combination, that raised questions on the soft-landing thesis that had been baked into market prices, where valuations were already pretty stretched. And this one came after a hawkish hike by Bank of Japan just two days prior.
While Morgan Stanley economists were expecting it, this hike was far from consensus going in. So, what this means is that this could lead to a greater divergence of monetary policy between the Fed and the Bank of Japan. That is, investors perceiving that the Fed may need to cut more and sooner, and that Bank of Japan may need to hike more; in both cases, more than expected.
As you know, when negative surprises show up together, volatility follows.
Zezas: Got it. And so last week's soft US employment data raises the question of w…
-
Why Money Market Funds Aren’t ‘Cash On The Sidelines’
6 augustus 2024 · 5 min
Risk-averse investors have poured trillions into money-market funds since 2019. Our Chief Fixed Income Strategist explains why investors shouldn’t expect this money to pivot to equities and other risk assets as rates fall. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I am Vishy Tirupattur, Morgan Stanley’s Chief Fixed Income Strategist. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about money market funds.
It's Tuesday, August 6th at 3pm in New York.
Well over $6.5 trillion sit in US money market funds. A popular view in the financial media is that the assets under management in money market funds represent money on sidelines, waiting to be allocated to risk assets, especially stocks. The underlying thesis is that the current level of interest rates and the consequent high money market yields have resulted in accumulation of assets in money market funds; and, when policy easing gets under way and money market yields decline, these funds will be allocated towards risk assets, especially stocks. To that I would say, curb your enthusiasm.
Recent history provides helpful context. Since the end of 2019, money market funds have seen net inflows of about $2.6 trillion, occurring broadly in three phases. The first phase followed the outbreak of COVID, as the global economy suddenly faced a wide array of uncertainties. The second leg mainly comprised retail inflows, starting when the Fed began raising rates in 2022.The third stage came during the regional bank crisis in March-April 2023, with both retail and institutional flows fleeing regional bank deposits into money market funds.
Where do we go from here?
We think money market funds are unlikely to return to their pre-COVID levels of about $4 trillion, even if policy easing begins in September as our economists expect. They see three 25 basis point rate cuts in 2024 and four in 2025 as the economy achieves a soft landing; and they anticipate a shallow rate-cut…
-
Making Sense of the Correction
5 augustus 2024 · 4 min
Although Monday’s correction springs from multiple causes, the real questions may be what’s next and when will the correction become a buying opportunity? Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Mike Wilson, Morgan Stanley’s CIO and Chief US Equity Strategist. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the recent equity market correction and whether it’s time to step in.
It's Monday, Aug 5th at 11:30am in New York.
So let’s get after it.
Over the past several weeks, global equity markets have taken on a completely different tone with most major averages definitively breaking strong uptrends from last fall. Many are blaming the Fed’s decision last week to hold interest rates steady in the face of weaker jobs data while others have highlighted the technical unwind of the Japanese yen carry trade.
However, if we take a step back, this topping process began in April with the first meaningful sell off since last October’s lows. Even as many stocks and indices rallied back to new highs this summer, the leadership took on a more defensive posture with sectors like Utilities, Staples and even Real Estate doing better than they have in years. As I have been discussing on this podcast this shift in leadership has coincided with softer economic data during the second quarter. This softness has continued into the summer with the all-important labor market data joining in as already noted.
This rotation was an early warning sign that stocks were likely vulnerable to a correction as we highlighted in early July. After all, the third quarter is when such corrections tend to happen seasonally for several reasons. This year has turned out to be no different. The real question now is what’s next and when will this correction become a buying opportunity?
Lost in the blame game is the simple fact that valuations reached very rich levels this year, something we have consistently discussed in our research. I…
-
Looking Back at a Whirlwind Week
3 augustus 2024 · 4 min
After a dizzying week of economic and market activity, our Head of Corporate Credit Research breaks down the three top stories. Lees meer
----- Transcript -----
It’s been a whirlwind week of economic activity in the markets as we enter the dog days of summer. Our Head of Corporate Credits Research breaks down three top stories.
Welcome to Thoughts on the Market. I'm Andrew Sheets, Head of Corporate Credit Research at Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, today I'll be discussing what we’ve taken away from this eventful week.
It's Friday, August 2nd at 2pm in London.
For all its sophistication, financial activity is still seasonal. This is a business driven by people, and people like to take time off in the summer to rest and recharge. There’s a reason that volumes in August tend to be low.
And so this week felt like that pre-vacation rush to pack, find your keys, and remember your ticket before running out the door. Important earnings releases, central bank meetings and employment numbers all hit with quick succession. Some thoughts on all that whirlwind.
The first story was earnings and continued equity rotation. Equity markets are seeing big shifts between which stocks are doing well and poorly, particularly in larger technology names. These shifts are a big deal for equity investors, but we think they remain much less material for credit.
Technology is a much smaller sector of the bond market than the stock market, as these tech companies have generally issued relatively little debt – relative to their size. Credit actually tends to overlap much more with the average stock, which at the moment continues to do well. And while the Technology sector has been volatile, stocks in the US financial sector – the largest segment for credit – have been seeing much better, steadier gains.
Next up this week was the Bank of Japan, which raised policy rates, a notable shift from many other central banks, which are starting to lower th…
-
Following the Flows
2 augustus 2024 · 5 min
Our Chief Global Cross-Asset Strategist, Serena Tang, explains where funds are moving across global markets currently, and why it matters to investors. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Serena Tang, Morgan Stanley’s Chief Cross-Asset Strategist. Along with my colleagues bringing you a variety of perspectives, today I’ll dig into the concept of fund flows, how they shape global markets and why they matter to investors.
It’s Thursday, August 1, at 10am in New York.
Finance industry professionals often use the term “flows” when looking at where investors are, in the aggregate, moving their money. It refers to net movements of cash in and out of investment vehicles such as mutual funds and exchange-traded funds, or in and out of whole markets. By looking at flows, investors can get a good sense of where market winds are blowing and, essentially, where demand is at any given moment. Now, whether you’re a retail or institutional investor, having a perspective on market sentiment and demand are powerful tools. So today I’m going to give you a snapshot of some key flows, which should give a sense of demand and the mood right now; and what it means for investors.
First of all, despite the recent rally in global equities year-to-date, we've yet to see an investor rotation, or portfolio realignment, from bonds to stocks. Flows into bonds are still leading flows into stocks by a pretty large margin. And unless stocks cheapen materially, we don’t expect this trend to reverse anytime soon. In addition, fund flows into large-cap equities still dwarf those into small-caps year-to-date. Although we saw a brief reversal of this trend in June, large caps flows have swung back to prominence.
We do see hints of sector rotation within equities, as investors shift to what they see as more promising stocks; but it’s not a clean or entirely unambiguous story. The Science & Tech sectors – which saw a notable drop-off in flows from the first to the second qu…
-
Will GenAI Help or Hurt Ad Agencies?
1 augustus 2024 · 4 min
As Generative AI continues to accelerate, some agencies will be better positioned than others to reap the benefits. Our Europe Media & Entertainment analyst, Laura Metayer, explains. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Laura Metayer, from the Morgan Stanley Europe Media & Entertainment team. Along with my colleagues bringing you a variety of perspectives, today I’ll discuss what the future may hold for advertising agencies amid fast-paced Generative AI developments.
It’s Wednesday, July 31, at 2 PM in London.
Right now we’re still in the early stages of GenAI’s impact on ad agency offerings; although the debate around technology removing the need for ad agencies is not new.
Soon after the release of ChatGPT in early 2023, my colleagues in North America started mapping out the potential impact of GenAI on the ad agencies. They concluded that GenAI should represent an opportunity for the ad agencies, at least near-term. First, Gen AI would lead to productivity improvements from automatable tasks in creative, media, digital transformation consulting and central functions like HR and Finance. Second, GenAI would boost client demand for advice from agencies to help navigate the coming evolution in digital advertising.
Fast-forward to now and the impact of GenAI on the ad agencies has become an active investor debate, with concerns centering around the Creative business. Many eyes are on the Gen AI-powered text to image/video tools, which could disrupt the ad agencies' Creative & Production business. We this has weighed on agency stock prices recently.
Essentially, the bear case has been – and is – that technology would devalue agencies’ offerings and agency clients may rely more on tech platforms and in-house services. That bear case – twenty years into online advertising – has not played out. We think that in these early days of AI’s impact on marketing, there may be more upside to agency equities than risk over the next 12 to 18 months…
-
Navigating the Quality and Cap Curves
31 juli 2024 · 4 min
A later cycle economy and continued uncertainty means that investors should be remain wary of cyclicals such as small caps, explains Mike Wilson, our CIO and Chief US Equity Strategist. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Mike Wilson, Morgan Stanley’s CIO and Chief US Equity Strategist. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about slowing growth in the context of high valuations.
It's Tuesday, July 30th at 3pm in New York.
So, let’s get after it.
Over the past few weeks, the equity markets have taken on a different complexion with the mega cap stocks lagging and lower quality small caps doing better. What does this mean for investor portfolios? And is the market telling us something about future fundamentals? In our view, we think most of this rotation is due to the de-grossing that is occurring within portfolios that are overweight large cap quality growth and underweight lower quality and smaller cap names.
We have long been in the camp that large cap quality has been the place to be – for equity investors – as opposed to diving down the quality and cap curves. That continues to be the case; though we are watching the fundamental and technical backdrop for small caps closely, and we’re respectful of the pace of the recent move in the space.
For now, however, we continue to think the better risk/reward is to stay up the quality curve and avoid the more cyclical parts in the market like small caps. Our rationale for such positioning is simple — in a later cycle economy where growth is softening or not translating into earnings growth for most companies, large cap quality outperforms.
Exacerbating the many imbalances across the economy is a bloated fiscal budget deficit. In our view, there are diminishing returns to fiscal spending when it starts to crowd out private companies and consumers. As I have been discussing for the past year, this crowding out has contributed to the bifurcati…
-
The Coming Nuclear Power Renaissance
30 juli 2024 · 6 min
Our sustainability strategists Stephen Byrd and Tim Chan discuss what’s driving new opportunities across the global nuclear power sector and some risks investors should keep in mind. Lees meer
----- Transcript -----
Stephen Byrd: Welcome to Thoughts on the Market. I'm Steven Byrd, Morgan Stanley's Global Head of Sustainability Research.
Tim Chan: And I'm Tim Chan, Asia Pacific Head of Sustainability Research.
Stephen Byrd: And on this episode of the podcast, we'll discuss some significant developments in the nuclear power generation space with long term implications for global markets.
It’s Monday, July 29th at 8am in New York.
Tim Chan: And 8 pm in Hong Kong.
Stephen Byrd: Nuclear power remains divisive, but it is making a comeback.
So, Tim, let's set the scene here. What's really driving this resurgence of interest in nuclear power generation?
Tim Chan: One key moment was the COP28 conference last year. Over 20 countries, including the US, Canada, and France, signed a joint declaration to triple nuclear capacity by 2050. Right now, the world has about 390 gigawatts of nuclear capacity providing 10 per cent of global electricity. It took 70 years to bring global nuclear capacity to 390 gigawatts. And now the COP28 target promises to build another 740 gigawatts in less than 30 years.
And if this remarkable nuclear journey is going to be achieved, that will require financing and also shorter construction time.
Stephen Byrd: So, Tim, how do you size the market opportunity on a global scale over the next five to ten years?
Tim Chan: We estimate that nuclear renaissance will be worth $ 1.5 trillion (USD) through 2050, in the form of capital investment in new global nuclear capacity. And the growth globally will be led by China and the US. China will also lead in the investment in nuclear, followed by the US and the EU. In addition, this new capacity will need $128 billion (USD) annually to maintain.
Stephen Byrd: Well, Tim, those are some gigantic numbers, $1.5 tril…
-
Three Risks for the Third Quarter
26 juli 2024 · 4 min
Our head of Corporate Credit Research, Andrew Sheets, notes areas of uncertainty in the credit, equity and macro landscapes that are worth tracking as we move into the fall. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Andrew Sheets, head of Corporate Credit Research at Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about three risks we’re focused on for the third quarter.
It's Friday, July 26th at 2pm in London.
We like credit. But there are certainly risks we’re watching. I’d like to discuss three that are top of mind.
The first is probably the mildest. Looking back over the last 35 years, August and September have historically been tougher months for riskier assets like stocks and corporate bonds. US High Yield bonds, for example, lose about 1 per cent relative to safer government bonds over August-September. That’s hardly a cataclysm, but it still represents the worst two-month stretch of any point of the year. And so all-else-equal, treading a little more cautiously in credit over the next two months has, from a seasonal perspective, made sense.
The second risk is probably the most topical. Equity markets, especially US equity markets, are seeing major shifts in which stocks are doing well. Since July 8th, the Nasdaq 100, an index dominated by larger high-quality, often Technology companies, is down over 7 per cent. The Russell 2000, a different index representing smaller, often lower quality companies, is up over 11 per cent. So ask somebody – ‘How is the market?’ – and their answer is probably going to differ based on which market they’re currently in. This so-called rotation in what’s outperforming in the equity market is a risk, as Technology and large-cap equities have outperformed for more than a decade, meaning that they tend to be more widely held. But for credit, we think this risk is pretty modest.
The weakness in these Large, Technology companies is having such a large i…
-
Investors’ Questions After Election Shakeup
25 juli 2024 · 3 min
Markets are contending with greater uncertainty around the US presidential election following President Biden’s withdrawal. Our Global Head of Fixed Income and Thematic Research breaks down what we know as the campaign enters a new phase. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the latest development in the US presidential race.
It's Thursday, July 25th at 2:30 pm in New York.
Last weekend, when President Biden decided not to seek re-election, it begged some questions from investors.
First, with a new candidate at the top of the ticket, are there new policy impacts, and potential market effects, resulting from Democrats winning that we haven’t previously considered?
For the moment, we think the answer is no. Consider Vice President Harris. Her policy positions are similar to Biden’s on key issues of importance to markets. And even if they weren’t, the details of key legislative policies in a Democratic win scenario will likely be shaped by the party’s elected officials overall. So, our guidance for market impacts that investors should watch for in the event that Democrats win the White House is unchanged.
Second, what does it mean for the state of the race? After all, markets in the past couple of weeks began anticipating a stronger possibility of Republican victory. It was visible in stronger performance in small cap stocks, which our equity strategy team credited to investors seeing greater benefits in that sector from more aggressive tax cuts under possible Republican governance.
It was also visible in steeper yield curves, which could reflect both weaker growth prospects due to tariff risks, pushing shorter maturity yields lower, and greater long-term uncertainty on economic growth, inflation, and bond supply from higher US deficits – something that could pus…
-
How Asian Markets View US Elections
25 juli 2024 · 4 min
Our Chief Asia Economist explains how the region’s economies and markets would be affected by higher tariffs, and other possible scenarios in the US elections. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Chetan Ahya, Morgan Stanley’s Chief Asia Economist. Along with my colleagues bringing you a variety of perspectives, today I’ll discuss a question that’s drawing increasing attention – just how the U.S. presidential election would affect Asian economies and markets.
It’s Wednesday, July 24th, at 8 PM in Hong Kong.
As the US presidential race progresses, global markets are beginning to evaluate the possibility of a Trump win and maybe even a Republican sweep. Investors are wondering what this would mean for Asia in particular. We believe there are three channels through which the US election outcome will matter for Asia.
First, financial conditions – how the US dollar and rates will move ahead of and after the US elections. Second, tariffs. And third, US growth outcomes, which will affect global growth and end demand for Asian exports. Well, out of the three our top concern is the growth downside from higher tariffs.
The 2018 experience suggests that the direct effect of tariffs is not what plays the most dominant role in affecting the macro outcomes; but rather the transmission through corporate confidence, capital expenditure, global demand and financial conditions.
Let’s consider two scenarios.
First, in a potential Trump win with divided government, China would likely be more affected from tariffs than Asia ex China. We see potentially two outcomes in this scenario – one where the US imposes tariffs only on China, and another where it also imposes 10 percent tariffs on the rest of the world.
In the case of 60 percent tariffs on imports from China, there would be meaningful adverse effect on Asia's growth and it will be deflationary. China would remain most exposed compared to the rest of the region, which has reduced its export exposur…
-
Almost Human: Robots in Our Near Future
23 juli 2024 · 4 min
Our Head of Global Autos & Shared Mobility discusses what makes humanoid robots a pivotal trend with implications for the global economy. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Adam Jonas, Morgan Stanley’s Head of Global Autos & Shared Mobility. Today I’ll be talking about an unusual but hotly debated topic: humanoid robots.
It’s Tuesday, July 23rd, at 10am in New York.
We've seen robots on factory floors, in displays at airports and at trade shows – doing work, performing tasks, even smiling. But over the last eighteen months, we seem to have hit a major inflection point.
What's changed? Large Language Models and Generative AI. The current AI movement is drawing comparisons to the dawn of the Internet. It’s begging big, existential questions about the future of the human species and consciousness itself. But let’s look at this in more practical terms and consider why robots are taking on a human shape.
The simplest answer is that we live in a world built for humans. And we’re getting to the point where – thanks to GenAI – robots are learning through observation. Not just through rudimentary instruction and rules based heuristic models. GenAI means robots can observe humans in action doing boring, dangerous and repetitive tasks in warehouses, in restaurants or in factories. And in order for these robots to learn and function most effectively, their design needs to be anthropomorphic.
Another reason we're bullish on humanoid robots is because developers can have these robots experiment and learn from both simulation and physically in areas where they’re not a serious threat to other humans. You see, many of the enabling technologies driving humanoid robots have come from developments in autonomous cars. The problem with autonomous cars is that you can't train them on public roads without directly involving innocent civilians – pedestrians, children and cyclists -- into that experiment.
Add to all of this the issue of critical labor sho…
-
Business Cycle May Trump Politics
23 juli 2024 · 5 min
Our CIO and Chief US Equity Strategist explains that in the event of a Republican sweep in this fall’s U.S. elections, investors should not expect a repeat of 2016 given the different business environment. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Mike Wilson, Morgan Stanley’s CIO and Chief US Equity Strategist. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about why investors should fade the recent rally in small caps and other pro cyclical trades.
It's Monday, July 22nd at 11:30am in New York.
So let’s get after it.
With Donald Trump’s odds of winning a second Presidency rising substantially over the past few weeks, we’ve fielded many questions on how to position for this outcome. In general, there is an increasing view that growth and interest rates could be higher given Trump's focus on business-friendly policies, de-regulation, higher tariffs, less immigration and additional tax cuts.
While the S&P 500 has risen alongside Trump's presidential odds this year, several of the perceived industry outperformers under this political scenario have only just recently started to show relative outperformance. One could argue a Trump win in conjunction with a Republican sweep could be particularly beneficial for Banks, Small Caps, Energy Infrastructure and perhaps Industrials. Although, the Democrats' heavy fiscal spending and subsidies for the Inflation Reduction Act, Chips Act and other infrastructure projects suggest Industrial stocks may not see as much of an incremental benefit relative to the past four years. The perceived industry underperformers are alternative energy stocks and companies likely to be affected the most by increased tariffs. Consumer stocks stand out in terms of this latter point, and they have underperformed recently. However, macro factors are likely affecting this dynamic as well. For example, concerns around slowing services demand and an increasingly value-focused consumer have…
-
Why Credit Markets Like Moderation
19 juli 2024 · 3 min
Our Head of Corporate Credit Research shares four reasons that he believes credit spreads are likely to stay near their current lows. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Andrew Sheets, Head of Corporate Credit Research at Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about why being negative credit isn’t as obvious as it looks, despite historically low spreads.
It's Friday, July 19th at 2pm in London.
We’re constructive on credit. We think the asset class likes moderation, and that’s exactly what Morgan Stanley forecasts expect: moderate growth, moderating inflation and moderating policy rates. Corporate activity is also modest; and even though it’s picking up, we haven’t yet seen the really aggressive types of corporate behavior that tend to make bondholders unhappy.
Meanwhile, demand for the asset class is strong, and we think the start of Fed rate cuts in September could make it even stronger as money comes out of money market funds, looking to lock in current interest rates for longer in all sorts of bonds – including corporate bonds.
And so while spreads are low by historical standards, our call is that helpful fundamentals and demand will keep them low, at least for the time being.
But the question of credit’s valuation is important. Indeed, one of the most compelling bearish arguments in credit is pretty straightforward: current spreads are near some of their lowest levels of several prior cycles. They’ve repeatedly struggled to go lower. And if they can’t go lower, positioning for spreads to go wider and for the market to go weaker, well, it would seem like pretty good risk/reward.
This is an extremely fair question! But there are four reasons why we think the case to be negative isn’t as straightforward as this logic might otherwise imply.
First, a historical quirk of credit valuations is that spreads rarely trade at long-run average. They are often either much wide…
-
The Surprising Link Between Auto Insurance and Inflation
19 juli 2024 · 9 min
Our experts discuss how high prices for auto insurance have been driving inflation, and the implications for consumers and the Fed now that price increases are due to slow. Lees meer
----- Transcript -----
Seth Carpenter: Welcome to Thoughts on the Market. I'm Seth Carpenter, Morgan Stanley's Global Chief Economist.
Diego Anzoategui: I'm Diego Anzoategui from the US Economics team.
Bob Huang: And I'm Bob Huang, the US Life and Property Casualty Insurance Analyst.
Seth Carpenter: And on this episode, we're going to talk about a topic that -- I would have guessed -- historically we weren't going to think about too often in a macro setting; but over the past couple of years it's been a critical part of the whole story on inflation, and probably affects most of our listeners.
It's auto insurance and why we think we're reaching a turning point.
It's Thursday, July 18th at 10am in New York.
All right, let's get started.
If you drive a car in the United States, you almost surely have been hit by a big increase in your auto insurance prices. Over the past couple of years, everyone has been talking about inflation, how much consumer prices have been going up. But one of the components that lots of people see that's really gone up dramatically recently has been auto insurance.
So that's why I wanted to come in and sit down with my colleagues, Diego and Bob, and talk through just what's going on here with auto insurance and how does it matter.
Diego, I'm going to start with you.
One thing that is remarkable is that the inflation that we're seeing now and that we've seen over the past several months is not related to the current state of the economy.
But we know in markets that everyone's looking at the Fed, and the Fed is looking at the CPI data that's coming out. We just got the June CPI data for the US recently. How does this phenomenon of auto insurance fit into that reading on the data?
Diego Anzoategui: Auto insurance is a relatively small component of CPI. It only r…
-
Navigating Market Reactions to the News Cycle
17 juli 2024 · 3 min
Financial markets can be sensitive to news cycles, but our Global Head of Fixed Income and Thematic Research offers a word of caution about reacting to recent headlines about the US presidential election. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about development in the upcoming US elections.
It's Wednesday, July 17th at 10:30am in New York.
Financial markets are starting to reflect the possibility of a Trump presidency. Investors may be taking cues from a few current developments. There’s the recent weakening of President Biden’s polling numbers in key swing states such as Pennsylvania, Michigan and Wisconsin. There’s also the ongoing discussion about whether he will remain the Democratic nominee. And there's also former President Trump’s increased win probabilities in prediction markets, as well as the perception that Democrats will have more trouble pursuing their agenda in the wake of the assassination attempt against him.
To that end we’ve seen moves in key areas of markets sensitive to what we have argued will be the policy impacts of a Trump presidency, including a steepening of the US Treasury yield curve. But – a word of caution. These market reactions to recent political events may be rational, but it's not clear they’re sustainable.
First, there are plausible ways investors’ perceptions of the likely outcomes of this election could shift. Voters can have very short memories, resulting in polls shifting to partisan priors. This happened with popular opinion on elected officials following notable incidents in recent years – such as the events of January 6th, 2021, the US withdrawal from Afghanistan, and more. Also, if President Biden were to withdraw as a candidate, it’s possible investors could perceive that a different candidate could tighten the race. For exam…
-
Beyond the 60/40 Portfolio?
17 juli 2024 · 5 min
Our Chief Global Cross-Asset Strategist explains why she sees a future for the 60/40 portfolio strategy, which worked well for over half a century and may continue to perform well – with some modifications. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Serena Tang, Morgan Stanley’s Chief Cross-Asset Strategist. Along with my colleagues bringing you a variety of perspectives, today I’ll discuss the future of the 60/40 equity/bond portfolio.
It’s Tuesday, July 16th, at 10am in New York.
Now investors have been asking: Is the 60/40 portfolio -- which allocates 60 percent to stocks and 40 percent to bonds -- dead? After all, the last two years saw some of the worst returns of this strategy in decades. Now, we think the concerns about this widely used strategy are not unfounded, but definitely a bit exaggerated. Exactly how one thinks about the right mix of equities and bonds within this type of portfolio though will need to change.
The strategy of investing 60 percent of a portfolio in equities and 40 percent in bonds to lower portfolio risk evolved from modern portfolio theory in the 1950s. To succeed, bonds must be less volatile than stocks and the correlation between stock and bond returns can't be 1 -- because that would mean a perfect positive correlation between stocks and bonds. And this correlation has been below 1 and low for a long time because growth and inflation have moved up and down in tandem for a long time.
Now what does this have to do with anything, you may ask. Well, typically in an environment where equities are rallying on the back of strong growth, inflation is also increasing – which in turn means that nominal yields stay high, dampening bond returns; and vice-versa in a recessionary scenario. Now, in both of those cases, the negative stock-bond return correlations is related to the positive growth inflation correlation. Which explains why the strategy of the 60/40 equity/bond portfolio worked so well for decades, particula…
-
Retail’s Comeback Plan
15 juli 2024 · 6 min
Our Retail analyst and U.S. Internet analyst connect the dots on how technology is helping the retail industry to cash in on the future. Lees meer
----- Transcript -----
Simeon Gutman: Welcome to Thoughts on the Market. I'm Simeon Gutman, Morgan Stanley's Hardlines, Broadlines, and Food Retail Analyst.
Brian Nowak: And I'm Brian Nowak, Morgan Stanley's US Internet Analyst.
Simeon Gutman: And on this episode of the podcast, we'll hear how retailers are using technology to make a comeback and set themselves up for the future.
It's Monday, July 15th at 6pm in London.
Brian Nowak: And it's 1pm in New York.
Simeon Gutman: Retail has taken a big hit over the last few years. The long tail of the pandemic, outbreaks of war and inflation have had a big impact on the landscape. However, our research suggests retail is finding its feet, and technology is playing a significant role.
Automation, AI, and retail media are the game changers here. And we're seeing retailers of larger scale and larger size disproportionately invest in these technologies -- which means it will not benefit all retailers equally.
My colleague Brian is here to help explain the technology and how these are manifesting themselves across the internet and technology landscapes. Brian, can you talk about how these things are materializing across your coverage universe?
Brian Nowak: Thanks, Simeon. Across the US internet space, we're seeing early emerging use cases for Generative AI of many types. We are seeing improved targeting on the advertising side. We are seeing new diffusion and creative models being built where advertisers can create new types of advertising copy using large language models. We are seeing new forms of customer service using large language models and Generative AI. And in effect, we are seeing companies across the entire internet space better analyze their first party data to drive more new people and customers to their platforms -- to drive higher conversion and share of wallets from …
-
Why We Believe the Fed Will – and Should – Cut Rates Soon
12 juli 2024 · 3 min
Our Head of Corporate Credit Research explains why he expects the US Federal Reserve to make three rate cuts before the end of the year, starting in September. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Andrew Sheets, head of Corporate Credit Research at Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about why it's looking more likely that the Fed should, and will, cut interests rates several times this year.
It's Friday, July 12th at 2pm in London.
Last week, we discussed why the case for Fed rate cuts this year was strengthening. Credit markets generally don’t care too much about the exact timing or pace of policy rates, but they do care if a central bank is behind the curve.
That’s because over the last 40 years, the worst returns for credit have repeatedly overlapped with periods where the Fed was too late in reversing tight monetary policy. After all, interest rates impact the economy with a pretty long and variable lag; and a interest rate cut today may not be fully felt in the economy for 12 months – or even longer. It’s therefore important for a central bank to be proactive.
And so, with the recent US economic data softer, and the Fed appearing in little rush to act, the concern was straightforward: if the Fed is waiting for signs of economic weakness to be obvious, it will take too long to lower interest rates to blunt this. The Fed will be behind the curve.
This risk of acting too late hasn’t gone away, and it’s a key reason why we think credit investors should be rooting for economic data in the second half of this year to remain solid, in line with Morgan Stanley’s base case. But this week did bring some events that suggest the Fed may start to adjust rates soon.
First, in testimony before the US Congress, Chair Powell repeatedly emphasized that the risks for the US economy are becoming more balanced. Previously, the Fed had appeared to be much more focused on an upside s…
-
Business Travelers Pack Their Bags
11 juli 2024 · 3 min
Our Freight Transportation & Airlines Analyst discusses the key takeaways from his mid-year corporate travel survey, which includes a number of positive trends for the second half of 2024. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Ravi Shanker, Morgan Stanley’s Freight Transportation and Airlines analyst. Along with my colleagues bringing you a variety of perspectives, today I’ll discuss my expectations for corporate travel in the second half of this year.
It’s Thursday, July 11th, at 10am in New York.
More and more business travelers are packing their bags and taking a flight for business meetings. In fact, our corporate travel survey suggests that a record 50 percent of respondents marked their travel itineraries as returning to pre-COVID levels. As well, corporate travel budgets are expected to be up five to seven percent year-over-year in 2024, and about six percent in 2025. This means significantly more flights, hotels and car bookings for corporate travel.
Interestingly, this is the first survey since 2021 that larger enterprises were more optimistic on corporate travel demand compared to smaller enterprises.
The shift to virtual meetings over the next two years will likely be stable. Companies continue to predict that 12-13 percent of travel volume will be replaced by virtual meetings in 2024 and 2025. Looking ahead, respondents expect this level to hold through 2025, supporting some level of permanent shift we think.
For US airlines specifically, we have started to see more signs of life within the corporate space. Several US airlines are pointing to noticeable improvement in the first quarter after fairly stagnant volumes at the end of 2023. We also saw a reversal from prior surveys with larger corporations recovering faster than smaller enterprises, which had initially led the post-COVID recovery.
This positive trend in airline demand is supportive of our attractive view on US aerospace, as well. Even though global air traffic …
-
Less Impact Than You Might Think
11 juli 2024 · 6 min
U.S., French and Indian elections may have a minimal effect on equity markets, particularly in the short term, according to our Global Head of Fixed Income and our Chief Global Cross Asset Strategist. Lees meer
----- Transcript -----
Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research.
Serena Tang: And I'm Serena Tang, chief Global Cross Asset Strategist,
Michael Zezas: And on this episode of the podcast, we'll discuss what the elections in the US and Europe mean for global markets.
It's Wednesday, July 9th at 10am in New York.
As investors digest the results of the French election and anticipate the upcoming US presidential election, there's some key debates that are surfacing. And so I wanted to sit down with Serena to dig into these issues that are top of mind for investors.
Serena, do you expect the upcoming US elections will impact markets in the run up to November?
Serena Tang: Significantly, not likely -- because if we look at history, for stocks for example, in any election year, returns don't look significantly different from any other year.
Serena Tang: My team ran some cross asset analysis on market behavior in and out of prior US elections using as much data as we have. And what has been very interesting is that whether a Democrat or Republican candidate eventually takes the White House, that doesn't change the trend of returns into an election.
The form of the future elected government, whether it is divided or unified, that has also never really bothered stock markets before the vote. And you can see very, very similar patterns in bond yields, the dollar and gold. Now, what this means is that even if an investor has perfect foresight and know the results of the elections now, it won't necessarily give them an edge over the next few months.
Serena Tang: Now, beyond the election is really when you see performance in various election outcome scenarios really diverge. So,…
-
US Housing: What Will Slow Home Price Growth?
10 juli 2024 · 7 min
Record-high prices remain a key concern for buyers in the U.S. housing market. Our Co-Heads of Securitized Product Research dig into the data, explaining why they still believe a deceleration in home price growth will come. Lees meer
----- Transcript -----
Jay Bacow: Welcome to Thoughts on the Market. I'm Jay Bacow, co-head of Securitized Products Research at Morgan Stanley.
James Egan: And I'm Jim Egan, the other co-head of Securitized Products Research at Morgan Stanley. It's Tuesday, July 9th, at 1pm in New York.
Jay Bacow: Jim, housing headlines just keep coming. Home prices are at record highs. What does that mean? How should we be thinking about that?
James Egan: So, that has been a fun headline, and according to several measures of home prices, we are at record highs. But, let's put that into context. We've actually set a new record high for home prices every month for the past ten months. In fact, prior to a 12-month hiatus from July of ’22 to June of ’23, home prices had actually hit a new record high every month for 68 consecutive months.
Jay Bacow: Alright, so if we're just talking about levels, it's important. But given that I'm a physicist by training, so are rates of change; and for that matter, changes to the rate of change, or acceleration, if you will. If there's something different about the current record of US home prices that is worth discussing, that would be interesting.
James Egan: We think there is. Actually two months ago, home prices set a new record high. But it was also the first time in ten months that the pace of year-over-year home price appreciation did not accelerate. This month the pace of appreciation actually started to decelerate.
As listeners of this podcast might remember, we've been calling for the pace of year-over-year home price appreciation to slow from above 6.5 per cent to just two percent by December. We are still above six percent today, but this could be the beginning of that deceleration.
Jay Bacow: Right. And if th…
-
2024 US Elections: The Impact of Inflation
9 juli 2024 · 4 min
Inflation continues to be a key issue for voters in elections around the world. Our CIO and Chief US Equity strategist explains its potential influence on the upcoming US presidential election, and how investors may react to potential outcomes of this race. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Mike Wilson, Morgan Stanley’s CIO and Chief US Equity Strategist. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the consequences of elections on policy and markets.
It's Monday, July 8th at 2:30pm in New York.
So let’s get after it.
Several important elections around the world have taken place with important implications for policy and markets. Most notably, elections in India, Mexico, the UK and France have all garnered the attention of investors.
While these elections are unique to each country, there does appear to be a growing focus on the issue of economic inequalities and immigration. While these inequalities have been building for decades, the COVID pandemic and policies implemented to deal with it have ushered in a higher focus on these disparities and a general level of uncertainty about the future on the part of many citizens.
Of all the changes affecting the average person most adversely, inflation stands out as the most challenging. While the rate of change on inflation has been steadily falling since 2022, the price level of a number of goods and services remains challenging for many. Prices for basic items like food, shelter, healthcare, insurance and utilities are 30 to 50 per cent higher than they were pre-pandemic. Offsetting some of this increase has been the rise in home equity and financial asset prices, but this only helps those who are asset owners. Fixed rate mortgages have also been a notable positive offset to rising prices and interest rates. For many, there is a natural arbitrage between these pre-existing, historically low mortgage rates and money market rates. Once agai…
-
Special Encore: A Sobering View on the Spirits Sector
5 juli 2024 · 4 min
Original release date April 15, 2024: Markets are suggesting that spirits consumption will return to historical growth levels post-pandemic, but our Head of European Consumer Staples Research disagrees. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Sarah Simon, Head of the European Consumer Staples team. Along with my colleagues bringing you a variety of perspectives, today I'll talk about a surprising trend in the global spirits market.
It's Monday, April 15, at 2pm in London.
We all remember vividly the COVID-19 period when we spent much more on goods than services, particularly on goods that could be delivered to our homes. Not surprisingly, spirits consumption experienced a super-cycle during the pandemic. But as the world returned to normal, the demand for spirits has dropped off. The market believes that after a period of normalization, the US spirits market will return to mid-single-digit growth in line with history; but we think that’s too optimistic.
Changes in demographics and consumer behavior make it much more likely that the US market will grow only modestly from here. There are several key challenges to the volume of US alcohol consumption in the coming years. Sobriety and moderation of alcohol intake are two rising trends. In addition, there’s the increased use of GLP-1 anti-obesity drugs, which appear to quell users' appetite for alcoholic beverages. And finally, there’s stiffer regulation, including the lowering of alcohol limits for driving.
A slew of recent survey data points to consumer intention to reduce alcohol intake. A February 2023 IWSR survey reported that 50 per cent of US drinkers are moderating their consumption. Meanwhile, a January 2024 NCSolutions survey reported that 41 per cent of respondents are trying to drink less, an increase of 7 percentage points from the prior year. And importantly, this intention was most concentrated among younger drinkers, with 61 per cent of Gen Z planning to drink less in 2024, up…
-
Why Central Banks Still Get It Wrong Sometimes
3 juli 2024 · 3 min
Central banks play a crucial role in monetary policy and moderating the business cycle. Our Head of Corporate Credit Research explains why, despite their power, these financial institutions can’t quickly steer through choppy economic waters. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Andrew Sheets, head of Corporate Credit Research at Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about why credit may start to get more concerned that the Fed will make the same mistake it often does.
It's Wednesday, July 3rd at 2pm in London.
Central banks are among the most powerful actors in financial markets, and investors everywhere hang on their every word, and potential next move. If possible, that seemed even more true recently, as central banks first intervened aggressively in bond markets during the height of COVID, and then raised interest rates at the fastest pace in over 40 years.
Indeed, you could even take this a step further: many investors you speak to will argue central banks are the most important force in markets. All else comes second.
But this view of Fed supremacy over the market and economy has an important caveat. For all of their power, the Federal Reserve did not prevent the recession of 1990. It did not prevent the dotcom bust or recession of 2001. It did not prevent the Great Financial Crisis or Great Recession of 2007-2009. These periods have represented the vast majority of credit losses over the last 35 years. And so, for all of the power of central banks, these recessions, and their associated default cycles in credit, have kept happening.
The reasons for this are varied and debatable. But the central issue is that the economy is a bit like a supertanker; it’s hard to turn quickly. You need to make adjustments well in advance, and often well before the signs of danger are clear.
Currently, the Fed is still pressing the economic brakes. Interest rates from the Federal Re…
-
Investors Eye Reactions to US Presidential Debate
2 juli 2024 · 3 min
Our Global Head of Fixed Income recaps the aftermath of the first U.S. presidential debate, and how markets may react if forthcoming poll data shows a meaningful shift in the race. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the US elections and its impact on markets.
It's Tuesday, July 2nd at 10:30am in New York.
For months, investors have been asking us when markets will start paying attention to the US presidential election. Well, we think that time arrived with last week’s Presidential debate.
The media coverage that followed revealed that many Democratic party officials became concerned about President Biden’s ability to win the November election. This understandably led many to ask if the race for the White House had meaningfully changed; If it was no longer a close one – and if so, what would that mean for markets that might have to start pricing in the impacts of a Trump Presidency.
On the first question: While we think it's too early to conclude that the race is no longer a close one, we expect some data in the next week or two that could clarify this. The few polls that have been released following the debate show that voters are increasingly concerned about Biden’s ability to win; but they also show a level of support for Biden similar to what he enjoyed before the debates.
What we haven’t seen yet is a set of high-quality polls gauging swing state voter preferences. And even modest deterioration in Biden’s support there could meaningfully boost Trump’s prospects. That’s because, going into the debate, polls showed former President Trump with a small but consistent lead in national and key swing state polls.
Nothing outside the polling margin of error. But it still suggested that for President Biden to improve his odds of winning, he’d be served well by ha…
-
Housing Update: Home Prices Unlikely to Decline
1 juli 2024 · 4 min
Rising rents and mortgage payments have been at the center of the inflation discussion. Our Global Chief Economist assesses whether monetary policy can effectively blunt those figures. Lees meer
----- Transcript -----
Seth Carpenter: Welcome to Thoughts on the Market. I'm Seth Carpenter, Morgan Stanley's Global Chief Economist. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the housing market, inflation, growth and monetary policy.
It's Monday, July 1st, at 11am in New York.
Housing is at the center of many macro debates from growth to inflation. And when you put those two together – monetary policy. House prices have continued to rise despite high interest rates, which gives the impression to some of stalled deflation and forces consumers at times to make some really difficult choices. And in some economies, there's a seeming lack of responsiveness of housing to higher interest rates. All of which tends to prompt questions about the efficacy of monetary policy.
So where are we? We think monetary policy is still working through housing as it usually does, but supply shortages, or in some places just idiosyncratic factors like buildable lands or permitting, that's supported home prices. And as has been the case across several sectors in this business cycle, there really are some factors about housing that's just different in this cycle than in previous ones. For the U.S., a key part of the housing story has been the mortgage lock in for homeowners. Our strategists have noted that the gap between the current new mortgage rate and the average effective mortgage rate is at historical highs. And the share of 30 year fixed rate mortgages is at its highest in a decade.
Consequently, the inventory of existing houses has remained low because homeowners who have those really low mortgages are reluctant to move unless they have to. The market has become thinner with less available supply; and then if we think more broadly for the econ…
-
Why Good Data Is Good For Markets
28 juni 2024 · 4 min
Our Head of Corporate Credit Research makes the case against the popular notion that solid economic data would be bad for markets, and instead offers a rationale for why now, more than ever, is the time for investors to root for positive economic developments. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Andrew Sheets, Head of Corporate Credit Research at Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about why good data … is good.
It's Friday, June 28th at 2pm in London.
One of the bigger investor debates of 2024 is whether stronger or weaker economic data is the preferred outcome for the market. This isn’t a trick question.
Post-COVID, a large spike of inflation led to the fastest pace of interest rate hikes by central banks in over forty years. And so there’s been an idea that weaker economic data, which would reduce that inflationary pressure and make central banks more likely to cut interest rates, is actually the better outcome for the market. Those lower interest rates after all might be helpful for moving the market higher or tighter. And stronger economic data, in contrast, could lead to more inflationary pressure, and even more rate increases. And so by this logic, bad data is good … and good data, well, would be bad.
This “bad is good” mindset was prominent in the Autumn of 2022 and again in September of 2023, as markets weakened on stronger data and fears that it could drive further rate hikes. We saw the idea return this year, amidst higher-than-expected inflation readings in the first quarter.
But we currently think this logic is misplaced. For markets, and certainly for credit, we think those who are constructive, like ourselves, are very much rooting for solid economic data. For now, good is good.
Our first argument here is general. Over a long swath of available data, the worst returns for credit have consistently overlapped with the worst economic growth. Hoping for w…
-
Introducing: What Should I Do With My Money Season 2
28 juni 2024 · 3 min
If you're a listener to Thoughts on the Market you may be interested in Season 2 of our podcast: What Should I Do With My Money? Lees meer
----------------
Money is emotional and that can make it difficult to know if we’re making the right decisions. This season, the stakes are high. From prenups to passing a legacy to their children, from affording a dream home to literally wanting to save the planet, our guests get to the heart of what matters to them most and you get answers to some of the questions you might have yourself.
No matter where you are with your finances, you don’t have to navigate them alone. Our Financial Advisors show once again that a little guidance can go a long way. Join us to hear how a conversation can turn concern into confidence, hosted by Morgan Stanley Wealth Management’s Jamie Roô.
-----
This material has been prepared for educational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
Important information about your relationship with your Financial Advisor and Morgan Stanley Smith Barney LLC when using a Financial Planning tool. When your Financial Advisor prepares a Financial Plan, they will be acting in an investment advisory capacity with respect to the delivery of your Financial Plan. To understand the differences between brokerage and advisory relationships, you should consult your Financial Advisor, or review our Understanding Your Brokerage and Investment Advisory Relationships brochure available at https://www.morganstanley.com/wealth-relationsh…
-
Funding the AI Revolution
27 juni 2024 · 4 min
As the infrastructure needs for artificial intelligence soar, so does the need for financing. Our Chief Fixed Income Strategist talks about the role credit markets can play in providing capital to power the sector. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I am Vishy Tirupattur, Morgan Stanley’s Chief Fixed Income Strategist. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the role of credit markets in the artificial intelligence (AI) revolution.
It's Thursday, June 27th at 1 pm in New York.
Technology diffusion driven by artificial intelligence has been a defining theme for investors over the last few years. Recent developments in generative AI, or GenAI powered by large language models, have the potential to bring transformational changes across the economy. Today, I want to talk about the role of credit markets in this AI revolution.
The infrastructure requirements of AI – semi fabs, data centers and the energy resources to power the Gen AI models – are enormous. Our analysts estimate that GenAI power demand will rise rapidly, reaching 224 Trillion Watt hours by 2027 in their base case which is roughly close to Spain's total 2022 power consumption.
So, it goes without saying that AI infrastructure will need substantial capex. Early on, much of the AI capex has been funded by a combination of venture capital and retained earnings from cash-rich technology companies; in other words funded by equity capital. As the focus shifts from early innovators and enablers of AI to adopters of AI, these needs are bound to grow and will require more efficient forms of capital. We think that credit markets in various forms – unsecured, secured, securitized and asset-backed – will have a major role to play in this transformation.
So far, debt financing has played a relatively small part in funding technology companies, especially AI beneficiaries. The sector has significant capacity to add debt without a materia…
-
Fiscal Sustainability and the French and US Elections
27 juni 2024 · 4 min
Our Global Chief Economist explains why markets are concerned about uncertainty around the French and US elections, and how their outcomes may affect each economy’s debt load. Lees meer
---- Transcript -----
Seth Carpenter: Welcome to Thoughts on the Market. I'm Seth Carpenter, Morgan Stanley's Global Chief Economist. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about elections, and what they might mean for fiscal sustainability.
It's Wednesday, June 26th at 10am in New York.
Elections have unexpectedly become a key risk in an otherwise positive growth narrative for France this year. And there are a wide range of possible outcomes for the next government.
Fiscal sustainability is one key market narrative we have been flagging. And in France, the fiscal position is expected to deteriorate. Our strategists note that the 10-year OAT boon spreads have widened more than 20 basis points. And in their view, further discounts on OATs are likely due to the deficit trajectories in the different political scenarios and heightened political and economic uncertainty.
In recent work we've done on developed market government sustainability, we flagged that across DMs, even if fiscal deficits remain steady, interest expense on the debt will continue to rise, pushing up the debt to GDP ratios. Larger deficits would necessarily exacerbate the situation. Austerity is necessary to stabilize or lower the debt to GDP ratios.
For France in particular, the maturity profile and forward rates had meant there could be relatively more time for the repricing to happen; but the market reaction to the election has meant higher yields, effectively pulling forward that repricing. Relative to our analysis in the first quarter of 2024, the debt surfacing costs are already higher.
The election results have now led to expectations of higher deficits, implying faster rising debt to GDP ratios as well. This combination of higher rates and higher deficits is self-r…
-
Navigating the Narrow Stock Market
25 juni 2024 · 5 min
Our CIO and Chief US Equity Strategist explains how to make sense of the equity market’s narrow performance, and why stock picking takes on greater importance for investors. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Mike Wilson, Morgan Stanley’s CIO and Chief US Equity Strategist. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the narrowness in breadth and why that supports our preference for high quality and defensive stocks.
It's Tuesday, June 25th at 11:30am in New York.
So let’s get after it.
I am fond of the saying that the economy is not the stock market, and the stock market is not the economy. Often, a strong economy is not good for stocks, while a soft one can lead to higher equity prices. This latter case is the classic late cycle period in which we find ourselves. More specifically, when the economy is slowing from previous tightening by the Federal Reserve, the equity market starts to get excited about the Fed reversing course, and it looks forward to loosening policy and valuations rise in anticipation. With price/earnings multiples and other valuation metrics now in the top decile, the question is when will valuations matter and begin to fall faster than earnings growth and lead to a meaningful correction?
At the stock level, this is already happening as illustrated by the weakest breadth since 1965. In other words, most stocks are seeing valuations fall more than earnings are rising. This is exactly why stock picking has become so important for equity investors to outperform the S&P 500. While this creates a great long and short opportunity, the list of longs has become harder to find and why the momentum in a few stocks continues unabated. This also syncs with our view for the past year that large cap quality is likely to continue to outperform until something material changes in the macro environment. I see three potential candidates to change this seemingly very stable and ben…
-
Economics Roundtable: Global Elections in Focus
25 juni 2024 · 9 min
Halfway through a historic year for elections around the world, Morgan Stanley’s chief economists assess the impact of recent results on the global economy, and weigh potential effects from key elections to come. Lees meer
----- Transcript -----
Seth Carpenter: Welcome to Thoughts on the Market, and welcome back to the second part of a special two-part episode of the podcast. We've been covering Morgan Stanley's global economic outlook as we look into the third quarter of 2024. In the first part, we covered the twin themes of inflation in central banks. In this part, we're going to look at elections, with my colleagues Ellen Zentner, our Chief US Economist, Jens Eisenschmidt, our Chief Europe Economist, and Chetan Ahya, who is our Chief Asia Economist.
It's Monday, June 24th at 10 am in New York.
It is astounding if we look around the world just how many elections there have already been this year and how many more there are going to be. We will get to the US, but before we do, Chetan, in Asia, India is one of the most important economies; and in India they recently had elections. Can you just let our listeners know basically what happened and what do you think are the implications for that election for the Indian economy?
Chetan Ahya: Yeah Seth. So Definitely there was a big change in India in terms of the political outcome. So the ruling party did not get the full majority and they have had to form a government under a coalition structure. There is a question though, as a result of that, whether the policy shift will happen in India and the government will go back to redistribution instead of focusing on boosting investment and jobs.
Well, we think that, you know, there is no change. There is policy continuity. We think that this government is very much aligned in thinking that they want to keep inflation in check and current account deficit in check, i.e. macro stability should be in control. And they still believe that job creation is the way to ensure that the gen…
-
Economics Roundtable: Investors Eye Central Banks
22 juni 2024 · 12 min
Morgan Stanley’s chief economists examine the varied responses of global central banks to noisy inflation data in their quarterly roundtable discussion. Lees meer
----- Transcript -----
Seth Carpenter: Welcome to Thoughts on the Market. I'm Seth Carpenter, Morgan Stanley's global chief economist. We have a special two-part episode of the podcast where we'll cover Morgan Stanley's global economic outlook as we look into the third quarter of 2024.
It's Friday, June 21st at 10am in New York.
Jens Eisenschmidt: And 4pm in Frankfurt.
Chetan Ahya: And 10pm in Hong Kong.
Seth Carpenter: Alright, so a lot's happened since our last economics roundtable on this podcast back in March and since we published our mid-year outlook in May. My travels have taken me to many corners of the globe, including Tokyo, Sao Paulo, Sydney, Washington D. C., Chicago.
Two themes have dominated every one of my meetings. Inflation in central banks on the one hand, and then on the other hand, elections.
In the first part of this special episode, I wanted to discuss these key topics with the leaders of Morgan Stanley Economics in key regions. Ellen Zentner is our Chief US Economist, Jens Eisenschmidt is our Chief Europe Economist, and Chetan Ahya is our Chief Asia Economist.
Ellen, I'm going to start with you. You've also been traveling. You were in London recently, for example. In your conversations with folks, what are you explaining to people? Where do things stand now for the Fed and inflation in the US?
Ellen Zentner: Thanks, Seth. So, we told people that the inflation boost that we saw in the first quarter was really noise, not signal, and it would be temporary; and certainly, the past three months of data have supported that view. But the Fed got spooked by that re-acceleration in inflation, and it was quite volatile. And so, they did shift their dot plot from a median of three cuts to a median of just one cut this year. Now, we're not moved by the dot plot. And Chair Powell told everyone t…
-
Volatility Doesn’t Necessarily Rock the Boat
20 juni 2024 · 4 min
Our head of corporate credit research dives into the question of correlation and market volatility, and explains why stock indices can remain stable despite a certain level of turmoil, as we have seen recently in Europe. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Andrew Sheets, head of Corporate Credit Research at Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about correlations, and why they are currently so important to markets being calmer than they would otherwise be.
It’s Thursday, June 20th at 2pm in London.
Imagine you’re on a boat, maybe looking for sea life. People are milling around the deck, watching the vessel ripple through the waves. Suddenly someone spotsa whale, and everybody runs to port. The whale swims under the boat, and everybody now runs to starboard. The boat rocks significantly.
But imagine the same scenario where marine life is popping up on both sides of the vessel. You and your fellow passengers are all now running past each other in both directions. The movements balance out. The boat is pretty stable.
Believe it or not, this is how the volatility in the stock indices work. The individual passengers can be thought of as individual stocks, and how much they’re each moving around can be thought of as each stock’s volatility. The boat is the overall index – say, the S&P 500, the EuroStoxx 50, or an index of corporate bonds.
When everybody on the boat moves together, what we’d call a high correlation environment, you’d get a lot of rocking, or volatility, at the index level. But when people are moving in opposite directions, moving past each other; you can still have a lot of running, or individual vol – but the market, or the boat, will appear much more calm.
That is exactly what’s been happening, especially last week. Stocks within the S&P 500 are moving with unusual independence from each other, running to opposite sides of the boat, with the lowest such co…
-
Investment Discipline In An Election Year
18 juni 2024 · 3 min
Investors watching for market reactions would do well to stick to their existing plans in an environment where the economic impacts of any particular US election outcome remains unclear. Our Global Head of Fixed Income and Thematic Research explains. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the US elections and its impacts on markets.
It's Tuesday, June 18th at 10:30am in New York.
We first started covering the 2024 US election in December of last year. With about five months to go until the event, it’s a good time to take stock of what we’ve learned that might be useful for investors. In short, there’s a lot of noise around this election, and recognizing that noise is a first step toward not making mistakes around the event.
First, don’t make the mistake of confidently predicting an outcome. All indicators suggest it’s very unlikely that we’ll have a good sense about which candidate will win the election in the run up to the Election Day, and perhaps even in the days that follow. Neither candidate has a lead beyond a polling margin of error in sufficient states to suggest that if the election were held today that they would win the electoral college.
Prediction markets and polling models also point to a race that’s a toss-up. It all suggests a tight race going into Election Day. And with the sustained popularity of voting by mail, vote counts could move slowly, as they did in 2020; meaning we may have to dig in for another election week.
Second, don’t make the mistake of making big strategic changes in your portfolio just because it’s an election year. We recently studied this and there’s little pattern for how markets behave in the run up to an election, even when filtering for factors like similar outcomes and closeness of the race. Markets in the aggregate don’…
-
Tracking the Rebound in Tech IPOs
17 juni 2024 · 9 min
The AI revolution has helped fuel the tech IPO sector’s resurgence following a two-year lull. Our Co-Heads of Technology Equity Capital Markets join our Global Head of Fixed Income and Thematic Research to discuss the sustainability of this trend. Lees meer
----- Transcript -----
Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research for Morgan Stanley.
Diana Doyle: I am Diana Doyle, Managing Director and Co-Head of Technology Equity Capital Markets in the Americas.
Lauren Garcia Belmonte: And I'm Lauren Garcia Belmonte, Managing Director, Co-Head of Technology Equity Capital Markets Americas.
Michael Zezas: And on this episode of the podcast, we'll dive into what's ahead for the tech IPO market this year.
It's Monday, June 17th, at 11 am in New York.
Diana Doyle: And 8 am in San Francisco.
Michael Zezas: Since 2023 only nine technology companies completed an initial public offering, which is one of the longest periods of reduced IPO activity in history. For context, compare that with the all-time record of 124 technology IPOs in 2021. But with the first quarter of 2024 behind us, we're starting to see that picture improve. With tech and AI in focus right now, on today's episode, I want to speak with Diana and Lauren from our global capital markets team to get their take on where the tech IPO environment might be headed and what investors may want to watch for.
Lauren, maybe to start -- what's contributing to this resurgence in IPO activity this year?
Lauren Garcia Belmonte: Well, the market backdrop has been constructive. We've had the SMP and NASDAQ trading up 10 -- 11 per cent this year and multiples have been stable for technology businesses. And against this backdrop, we've seen some IPO issuers recognize that this is a good environment in which to move forward with their IPO event. There are several benefits to becoming a public company, not just the opportunity to raise capital -- but to give li…
-
This Is Still India’s Decade
14 juni 2024 · 4 min
Our Head of India Research and Chief India Equity Strategist lays out his bullish post-election view on India, explaining why the market is likely to drive a fifth of global growth in the coming decade. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Ridham Desai, Morgan Stanley’s Head of India Research and Chief India Equity Strategist. Along with my colleagues bringing you a variety of perspectives, today I’ll discuss our take on India’s election results and why we still believe this is India’s decade.
It’s Friday, June 14th, at 2pm in Mumbai.
India’s general election results are in, and the world is paying close attention. The most important aspect of the BJP led NDA retaining its majority is policy predictability – something equities tend to thrive on. We believe the market can look forward to further structural reforms. This gives us more confidence in our forecast of a 20 per cent annual earnings growth over the next five years. Macro stability with rising GDP growth relative to real rates should extend India's outperformance over Emerging Market equities.
We’ve been bullish on India since April 2020, and we still believe that India is likely to drive a fifth of global growth in the coming decade. This will be underpinned by increased offshoring of both services and manufacturing, as well as the energy transition and the country's advanced digital infrastructure. India's stock market has been making new highs. The big investor debate now is what could take the India market even higher from here.
We believe share prices have yet to bake in a number of positives, such as India's newfound macro stability, a likely fall in its primary deficit moving into a primary balance, and a fast-evolving deep tech sector, to name just a few.
We expect critical reforms to be made in Modi’s third term. Here are three more important ones.
Number one, further consolidation of India’s fiscal deficit. From a market perspective this lends itself to sustained c…
-
Cautious Corporate Boards Extend the Credit Cycle
14 juni 2024 · 3 min
A strong economy and global stock market surge may suggest market euphoria. However, our Head of Corporate Credit Research explains why the corporate sector caution is, in fact, a good sign. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Andrew Sheets, head of Corporate Credit Research at Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the surprising lack of confidence in corporate boardrooms, and why it could extend the cycle.
It's Thursday, June 13th at 2pm in London.
“Buy low, sell high.” That age-old advice is rooted in the idea that investors should try to buy when others are fearful and sell when others are euphoric. The high in prices, after all, should occur when people are as positive, and things are as good as they can possibly be.
At the moment, there is plenty of focus on this idea that the market pendulum may have swung too far towards excessive positivity. The economy is strong, with US growth tracking above 2 per cent, inflation moderating and the unemployment rate still near a 60 year low. US and global stock markets are near all-time highs. And many quantitative measures of investor optimism are elevated, whether it's the low levels of expected volatility, polls of investor outlooks or ownership of equity futures.
But we think there is one missing piece of this story, with relevance for credit and beyond. While investors are optimistic, corporate boardrooms remain much more restrained. And that caution could help extend the cycle.
One way to measure corporate optimism is whether or not companies are adding debt; a company is more likely to borrow when it feels better about the future. Well, as of the first quarter of 2024, the growth in US non-financial corporate borrowing was at a 10-year low. And among lower rated borrowers, the issuance of high yield bonds and loans remains dominated by borrowing to repay or refinance existing debt – the most conservative type of …