Alle afleveringen
1.740 afleveringen, van nieuw naar oud
-
US Elections: Potential Implications for Businesses and Consumers
2 april 2024 · 8 min
We discuss how the upcoming US elections could affect trade and tax policy, and which scenarios are most favorable to retailers and brands. Lees meer
----- Transcript -----
Ariana Salvatore: Welcome to Thoughts on the Market. I'm Ariana Salvatore from Morgan Stanley's US Public Policy Research Team.
Alex Straton: And I'm Alex Straton, head of the North America Softlines Retail and Brands team.
Ariana Salvatore: On this episode of the podcast, we'll discuss some key policy issues that may play into the U.S. presidential election and their potential impact on businesses and consumers.
It's Tuesday, April 2nd, at 10 am in New York.
Election season is fully underway here in the U.S. and as in past election cycles, trade policy and tax reform are once again a big concern.
With that in mind, I wanted to discuss the potential implications on the retail space with my colleague Alex. So, let's start there. In general, Alex, how are retail stocks impacted leading up to the U.S. presidential elections?
Alex Straton: So, look, this kind of surprised us when we had looked into some of this data. But if you look at the last six elections or so, on a full year basis, trading activity can be super volatile in my coverage; and it depends on what's at stake.
But what we do broadly observe is back half underperformance to a bigger magnitude than is typical in a normal year. So, there is pressure on these stocks, in a way that you don't see in non-election years. Makes sense, right? Kind of a makes sense hypothesis that we confirmed. But I think the more interesting nugget about Softlines, Retail and Brand stocks leading into elections is that the higher frequency data can actually look worse than what actually comes to fruition in the top line or the sales numbers.
So, by that I mean, you'll see surveys out of our economics team or out of, you know, big economics forums that say, ‘Oh, sentiment is getting worse.’ And then we'll see things like traffic is getting worse, these higher f…
-
How Immigration’s Rise Could Boost Economic Growth
1 april 2024 · 4 min
Our Global Chief Economist surveys recent US and Australian census data to explain immigration’s impact on labor supply and demand, as well as the implications for monetary policy. Lees meer
----- Transcript -----
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. And today, I'll be talking about immigration, economic growth, and the implications for monetary policy.
It's Monday, April 1st, at 10am in New York.
Global migration is emerging as an important macro trend. Some migration patterns change during and after COVID, and such changes can have first order effects on the population and labor force of an economy.
That fact has meant that several central banks have discussed immigration in the context of their economic outlook; and we focus here on the Fed and the Reserve Bank of Australia, the RBA.
In the US, recent population estimates from the CBO and the census suggests that immigration has been and is still driving faster growth in the population and labor supply, helping to explain some of last year's upside surprise in non-farm payrolls. In Australia, the issue is even longer standing, and accelerated migration in recent years has provided important support to consumption and inflation.
From a macro perspective, immigration can boost both aggregate demand and aggregate supply. More specifically, more immigration can lead to stronger consumption spending, a larger labor force, and may drive investment spending.
The permanence of the immigration, like some immigrants are temporary students or just visiting workers, the skill level of the migrants and the speed of labor force integration are consequential -- in determining whether supply side or demand side effects dominate. Demand side effects tend to be more inflationary and supply side effects more disinflationary.
In Australia, the acceleration in immigration has played an important driver in popula…
-
US Housing: Will Lower Fees Means Higher Sales?
28 maart 2024 · 5 min
A landmark settlement with the National Association of Realtors will change the way brokers are paid commissions. How would this affect people looking to buy or sell homes? Our co-heads of Securitized Products Research discuss. Lees meer
----- Transcript -----
James Egan: Welcome to Thoughts on the Market. I'm Jim Egan, co-head of Securitized Products Research at Morgan Stanley.
Jay Bacow: And I'm Jay Bacow, the other co-head of Securitized Products Research.
James Egan: And on this episode of the podcast, we'll be discussing some proposed changes to the US housing market. It's Thursday, March 28th, at 1pm in New York.
Jay Bacow: Jim, two weeks ago, the National Association of Realtors (NAR) settled a case that could fundamentally change how commissions are paid to brokers. Acknowledging that there's a few months until this is all going to get approved, it looks like sellers are no longer going to have to compensate buyers’ agents. Which means that the closing cost that sellers have to pay is going to come down from the current 5 to 6 per cent to brokers to something more in the context of 3.5 to 4 percent -- based on estimates from many economists. What does this mean for the housing market?
James Egan: So, this is certainly a settlement worth paying attention to.
There are a lot of moving pieces here, but some of our first thoughts. Look, if we're lowering the ultimate transaction costs when it comes to selling homes, we do think that -- all else equal and probably a little bit more into the future -- it's going to lead to a higher volume of transactions. Or a higher level of turnover in the housing market.
Now sellers no longer having to compensate buyers’ agents. That becoming something that buyers will need to do -- that could, at least from a perception perspective, increase the cost for buyers at a place, where we're already at one of our least affordable points in several decades. So, when we think about an increased level of transaction volumes; if that mean…
-
Are Credit Scores Inflated?
27 maart 2024 · 5 min
Consumer credit scores have ticked higher in the last two years – but so have the rate of delinquencies and defaults. Our Global Head of Fixed Income discusses “credit score migration” with the firm's Asset-Backed Security Strategist. 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.
Heather Berger: And I'm Heather Berger, Asset-Backed Security Strategist.
Michael Zezas: And today, we'll be talking about the trend of migrating US consumer credit scores and the potential effect on equities and fixed income. It's Wednesday, March 27th at 10am in New York.
Heather, I really wanted to talk to you today because we've all seen some recent news reports about delinquencies and defaults in consumer credit ticking higher over the last two years. That means more people missing payments on their car loans and credit cards, suggesting the consumer is increasingly in a stressed position. But at the same time, that seems to be at odds with what's been an upward trend in consumers’ credit scores, which on its face should suggest the consumer is in a healthier position.
So, it all begs the question: what's really going on here with the consumer, and what does it mean for markets? Now, you and your colleagues have been doing some really fascinating work showing that in order to get to the truth here, we have to understand that there's a measurement problem. There’s quirks in the data that, when you understand them, mean you have a more accurate picture of the health of the consumer. And that, in turn, can clarify some opportunities in the fixed income and equity markets.
So, this measurement problem seems to center around the idea of credit score migration. Can you start by explaining what exactly is credit score migration?
Heather Berger: Sure. So, credit scores are used as a way to estimate expected default risk on consumer loans. And these scores are really the …
-
Finding Late-Cycle Winners
26 maart 2024 · 4 min
As investors look for clues on market durability, our Chief U.S. Equity Strategist highlights which sectors could show more widely distributed gains in the near term. 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 an opportunity for energy stocks to keep working in the near term.
It's Tuesday, March 26th at 9:30 am in New York.
So let’s get after it.
Over the past five months, global stocks are up about 25 percent while many other asset prices were up double digits or more. What’s driving this appreciation? Many factors are at work. But for stock indices, it’s been mostly about easier financial conditions and higher valuations rather than improving fundamentals. Granted, higher asset prices often beget even higher prices – as investors feel compelled to participate. From our perspective, it’s hard to justify the higher index level valuations based on fundamentals alone, given that 2024 and 2025 earnings forecasts have barely budged over this time period.
We rolled out our “Boom-Bust” thesis in 2020 based on the shift to fiscally dominant policy in response to the pandemic. At that point, our positive view on stocks was based on the boom in earnings that we expected over the 2020-2021 period as the economy roared back from pandemic lows. Our outlook anticipated both accelerating top line growth and massive operating leverage as companies could reduce headcount and other costs while people were locked down at home. The result was the fastest earnings growth in 30 years and record high margins and profitability. In other words, the boom in stocks was justified by the earnings boom that followed. Stock valuations were also supported by arguably the most generous monetary policy in history. The Fed continued Quantitative Easing throughout 2021, a year when S&P earnings grew 48 percent to an al…
-
The Evolution of Private Credit
25 maart 2024 · 4 min
Morgan Stanley’s Chief Fixed Income Strategist explains why private credit markets have expanded rapidly in recent years, and how they may fare if public credit makes an expected comeback. 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, I'll be talking about the implications of the rapid growth in private credit for the broader credit markets.
It’s Monday, March 25th at 12 noon in New York.
The evolution of private credit is reshaping the landscape of leveraged finance. Investors of all stripes and all around the world are taking notice. The rapid expansion of private credit in the last few years has come against a much different backdrop in the public credit markets – a contraction in the high yield bond market and lackluster growth in the broadly syndicated loan market. What the emergence of private credit means for the public credit and the broader credit markets is a topic of active debate.
Just to be clear, let me define what we mean by private credit. Private credit is debt extended to corporate borrowers on a bilateral basis or involving very small number of lenders, typically non-banks. Lenders originate and negotiate terms directly with borrowers without the syndication process that is the norm in public markets for both bonds and loans. These private credit loans are typically not publicly rated; they’re not typically traded in secondary markets; tend to have stronger lender protections and offer a spread premium to public markets.
Given the higher overall borrowing costs as well the need to provide stronger covenant protection to lenders, what motivates borrowers to tap private credit versus public credit? Three key factors explain the recent rapid growth in private credit and show how private credit both competes and complements the public credit markets.
First, small and medium-sized companies that use…
-
Can ‘As Expected’ Still Give New Information?
22 maart 2024 · 4 min
Our Head of Corporate Credit notes that while recent central bank meetings offered few surprises, there was still plenty to be gleaned that could affect credit valuations. 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 this week’s central bank meetings, and why as expected outcomes can still mean new information for credit investors.
It's Friday, March 22nd at 2pm in London.
When a good friend was interviewing at Morgan Stanley, many years ago, he was asked a version of the ‘Monty Hall Problem.’ Imagine that you’re on a game show with a prize behind one of three doors. You make your guess of door 1, 2 or 3. And then the host opens one of the doors you didn’t pick, showing that it’s empty. Should you change your original guess?
While it’s a bit of a paradox, you should. Your original odds of finding the prize were 1-in-3. But by showing you a door with a wrong answer, the odds have improved. The host gave you new information.
And that’s what came to mind this week, after important meetings from the Federal Reserve and Bank of Japan. Both banks acted in-line with our economists’ expectations. But those meetings and what came after still provided some valuable new information. Information that, in our view, was helpful to credit.
On Tuesday, the Bank of Japan raised interest rates for the first time since 2016, ended Yield Curve Control, and ended its purchases of equities. All of these measures had been previously used to help boost too-low inflation. But they have also resulted in a significant weakening of Japan’s currency, the Yen. And that, in turn, had made it attractive for Japanese investors to invest in overseas bonds in other currencies – which were gaining value as the Yen weakened.
So, one risk heading into this week was that these big changes in the Bank of Japan would rever…
-
European Financials: Why Confidence Has Returned
22 maart 2024 · 8 min
The perspective from our recent European Financials Conference looked positive for UK markets, loan demand and M&A activity. Our European heads of Diversified Financials and Banks Research discuss. Lees meer
----- Transcript -----
Bruce Hamilton: Welcome to thoughts on the Market. I'm Bruce Hamilton, head of European Diversified Financials Research.
Alvaro Serrano: And I'm Alvaro Serrano, head of European Banks Research.
Bruce Hamilton: And on this episode of the podcast, we'll discuss some of the key takeaways from Morgan Stanley's just concluded 20th European Financials Conference. It's Thursday, March 21st at 3 pm in London.
Alvaro, we were both at the European Financials Conference in London. More than 100 companies attended the event. 95 percent of the attendees were from CE level management. There was a lot to take in.
Investor sentiment heading into the conference seemed noticeably more upbeat than last year's, thanks in part to stronger-for-longer net interest income (NII), an M&A cycle that is heating up, attractive capital returns, and increasing activity in private markets.
Now you were the conference chair, Alvaro. And you have a unique overview of this event. What's, in your view, the single most important takeaway?
Alvaro Serrano: Thanks, Bruce. Look, I think for me that if I had to summarize in two words is ‘risk on.’ I think the tone of the conference has been positive almost across the board. The lower rate outlook has increased market confidence. And corporates were pointing that out. They've seen stronger activity, so far this year, in many product lines. They've called out loan demand being stronger. They've called out debt capital market activity being stronger. They've announced M&A -- we know is up strongly and asset management inflows are up strong as well. So yes, a strong start to the year - confidence is back, and I would summarize it as risk on.
Bruce Hamilton: Got it. And in terms of the other key themes and debates that emerged from com…
-
2024 US Elections: Global Investors' Key Questions
20 maart 2024 · 4 min
Our Global Head of Fixed Income and Thematic Research outlines the potential impact the upcoming U.S. elections could have on increasing treasury yields, US-China policy and Japan’s current trajectory. 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 overseas investors' view on the US election.
It's Wednesday, Mar 20th at 10:30 am in New York.
I was in Japan last week. And as has been the case with other clients outside the US, the upcoming American elections were a key concern. To that end, we’re sharing the three most frequently asked questions, as well as our answers, about the impact of the U.S. election on markets coming from clients outside the US.
First, clients are curious what the election could mean for what’s recently been a very rosy outlook for Japan. The central bank is taking steps toward normalizing monetary policy which, combined with corporate reforms, is driving renewed investment. And it doesn’t hurt that multinationals are finding it more challenging to do new business in China due to U.S. policy restrictions. In our view, regardless of the election outcome, these positive secular trends will continue. While its true that Republicans are voicing greater interest in tariffs on US friend and foe alike, in our view there are other geographies more likely to bear the impact of stricter trade policy from the US – such as Europe, Mexico, and China; areas where there’s clearer overlap between US trade interests and the geopolitical preferences of the Republican party.
Second, clients wanted to know what the election would mean for US-China policy. The first thing to understand is that both parties are interested in policies that build barriers protecting technologies critical to US economic and national security. For Democrats, this has meant a focus on extend…
-
Asia Equities: A Quarter of Dispersion
19 maart 2024 · 4 min
Our Chief Asia and Emerging Market Equity Strategist reviews an up-and-down first quarter for markets across the region, and gives an update on which sectors investors should be eyeing. Lees meer
----- Transcript -----
Welcome to the Thoughts on the Market. I’m Jonathan Garner, Morgan Stanley’s Chief Asia and Emerging Market Equity Strategist. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about our key investment views in Asia. It's Tuesday, Mar 19th at 9 am in Singapore.
It's been quite a first quarter in Asian equities with a wide degree of dispersion in market returns. At one end of the spectrum Japan’s Nikkei index is up 16 percent. At the other end, despite a recent rally, the Hang Seng index in Hong Kong is down 2 percent for the year. Meanwhile, the AI thematic has helped Taiwan into second place regionally, with a 10 percent gain; but Korea has risen by a lot less.
Our highest conviction views remains that we’re in the midst of multi-year secular bull markets in Japan and India, whilst at the same time China is in a secular bear market. So, let’s lay out the building blocks of those theses.
Firstly, Japan’s Return on Equity Journey. We think that markets – like stocks – reward improvement in profitability or ROE. The drivers of the ROE improvement are numerous but include domestic reflation, a weaker Yen, a productive capex cycle and improved capital management by Japan’s leading firms. And these together have led to improving net income margins in two-thirds of industries versus a decade ago.
We forecast robust EPS growth of around 9 percent in 2024, with similar growth in 2025. Now that’s assuming our foreign exchange strategists’ USD/JPY forecast of 140 for the fourth quarter of this year is accurate. This week the BOJ – the Bank of Japan – is considering whether to exit its Negative Interest Rate Policy and abolish or flex yield curve control. If it does so, that will be a sign – along with recent strong wage gains –…
-
Finding the Equity Sweet Spot
18 maart 2024 · 3 min
Our CIO and Chief Equity Strategist discusses the continued uncertainty in the markets, and how investors are now looking at earnings growth and improving valuations. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Mike Wilson, Morgan Stanley’s CIO and Chief U.S. Equity Strategist. Along with my colleagues bringing you a variety of perspectives, today I'll be talking about the risk of higher interest rates and equity valuations.
It's Monday, March 18th at 11:30 am in New York.
So let’s get after it.
Long term interest rates peaked in October of last year and coincided with the lows in equities. The rally began with the Treasury's guidance for less coupon issuance than expected. This surprise occurred at a time when many bond managers were short duration. When combined with the Fed’s fourth quarter policy shift, there was a major squeeze in bonds. As a result, 30-year Treasury bonds returned 19 per cent over the October-December 2023 period, beating the 14 per cent return in the S&P 500. Nearly all of the equity return over this period was attributable to higher valuations tied to the fall in interest rates.
Fast forward to this year, and the story has been much different. Bond yields have risen considerably as investors took profits on longer term bonds, and the Fed walked back several of the cuts that had been priced in for this year. The flip side is that the growth data has been weaker in aggregate which argues for lower rates. Call it a tug of war between weaker growth and higher inflation than expected.
There is also the question of supply which continues to grow with the expanded budget deficit. From an equity standpoint, the rise in interest rates this year has not had the typically negative effect on valuations. In other words, equity investors appear to have moved past the Fed, inflation and rates – and are now squarely focused on earnings growth that the consensus expects to considerably improve.
As noted in prior podcasts, the conse…
-
Rate Cut Uncertainty
15 maart 2024 · 3 min
Our Head of Corporate Credit Research explains why leveraged loans would benefit if bumpy inflation data leads the Federal Reserve to delay interest rate cuts. 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 ramifications of the fed rate cuts, and what it could mean for credit – and what would benefit if rates stay higher for longer. It's Friday, March 15th at 2pm in London.
The big story in markets this week was inflation. U.S. Consumer Price inflation continues to moderate on a year-over-year basis, but the recent path has been bumpier than expected.
And as U.S. Economic growth in the first quarter continues to track above initial expectations, there’s growing debate around whether the U.S. economy is still too strong to justify the Federal Reserve lowering rates.
Morgan Stanley’s economic base case is that these inflation readings will remain bumpy – but will trend lower over the course of the year. And if we couple that with our expectations that job growth will moderate, we think this still supports the idea that the Federal Reserve will start to lower interest rates starting in June.
Yet the bumpiness of this recent data does raise questions. What if the Federal Reserve lowers rates later? Or what if they lower rates less than we expect?
For credit, we think the biggest beneficiary of this scenario would be leveraged loans. For background, these represent lending to below-investment grade borrowers, similar to the universe for high yield bonds. But loans are floating rate; their yields to investors rise and fall with central bank policy rates.
Coming into 2024, there were a number of concerns around the levered loan market. Worries around growth had led markets at the start of the year to imply significant rate cuts from the Fed. And that’s a double whammy, so to speak, for l…
-
Economics Roundtable: Updating our 2024 Outlook
14 maart 2024 · 12 min
Morgan Stanley’s chief economists have their quarterly roundtable discussion, focusing on the state of inflation across global regions, the possible effect of the US election on the economy and more. Lees meer
----- Transcript -----
Seth Carpenter: Welcome to Thoughts On the Market. I'm Seth Carpenter, Morgan Stanley's Global Chief Economist. On this episode, on this special episode of the podcast, we'll hold our second roundtable discussion covering Morgan Stanley's global economic outlook as we look into the second quarter of 2024.
It's Thursday, March the 14th at 10 am in New York.
Jens Eisenschmidt: And it's 2 pm in London.
Chetan Ahya: And 10pm in Hong Kong.
Seth Carpenter: Excellent. So, things around the world have changed significantly since our roundtable last quarter. US growth is notably stronger with few signs of a substantial slowdown. Inflation is falling, but giving some hints that things could stay -- maybe -- hotter for longer.
In Europe, things are evolving mostly as anticipated, but energy prices are much lower, and some data suggest hope for a recovery. Meanwhile, in China, debt deflation risks are becoming a reality. And the last policy communication shows no sign of reflation. And finally, Japan continues to confirm the shift in equilibrium, and we are expecting the policy rate change imminently.
So, let's dig into these developments. I am joined by the leaders of the economics team in key regions. Ellen Zentner is our Chief US Economist, and she's here with me in New York. Chetan Ahya is our Chief Asia Economist, and Jens Eisenschmidt is our Chief Europe Economist.
Ellen, I'm going to start with you and the US. Have the stronger data fundamentally changed your view on the US economy or the Fed?
Ellen Zentner: So, coming off of 2023, growth was just stronger than expected. And so, carrying that into 2024, we have revised upward our GDP forecast from 1.6 per cent Q4 over Q4 to 1.8 per cent. So already we've got stronger growth this year. We hav…
-
Revving Up the Speed of E-Commerce Delivery
13 maart 2024 · 4 min
Our Freight Transportation & Airlines Analyst unboxes the latest trends around parcel transit times and systems in the U.S. and their impact on the future of e-commerce supply chains. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Ravi Shanker, Morgan Stanley’s Freight Transportation analyst. Along with my colleagues bringing you a variety of perspectives, today I’ll discuss what’s happening in the eCommerce parcel delivery space.
It’s Wednesday, March 13, at 10 AM in New York.
Most people love the convenience of online shopping. You click, you pay. Next thing you know, your doorbell rings. Turns out, we’ve become so used to this kind of instant gratification that many customers now abandon an online cart – if the delivery process takes too long.
eCommerce parcel delivery companies are taking notice of consumers' growing impatience and are putting a lot of effort into making parcel transit shorter, faster and tighter. A couple of factors drive this trend. First, we have the retailers’ desire to store inventory at more locations; closer to the end-consumer versus the centralized, nationalized distribution centers of the old model. Second, connecting those inventory locations quickly, easily and cheaply by truck rather than long-haul transportation modes like air or rail. As a result, companies can offer consumers one-day or same-day delivery in a highly cost-effective manner.
This means a shift from long-distance transit via air towards ground transportation – be it express or non-express ground. Such a transition could be a drag on margins at major parcel companies. These players are fully aware of the risk; and they’re making their own structural changes and downsizing their air business. However, even as big parcel companies are trying to keep up with the times and evolving consumer pressures, the transition from long-haul air to short-haul truck makes parcel delivery a less complex operation to run – and that may attract more competitors ove…
-
Where AI Is Advancing
12 maart 2024 · 8 min
Our roundtable of experts recaps highlights from the 2024 Morgan Stanley Technology, Media & Telecom Conference, including AI innovation, trends in live entertainment and the need for operational efficiency. Lees meer
----- Transcript -----
Michelle Weaver: Welcome to Thoughts on the Market. I'm Michelle Weaver, Morgan Stanley Research's US thematic strategist. I'm joined by Ben Swinburne, who leads coverage of the media and entertainment, advertising, and cable and satellite industries, and Kieran Kenny, who covers internet. Along with my colleagues, bringing you a variety of perspectives, today we'll discuss some key themes from Morgan Stanley's recently concluded Technology, Media, and Telecom Conference in San Francisco.
It's Tuesday, March 12th, at 10am in New York.
Ben, Kieran, we have to lead off on AI. It was a tech conference. As we've written about in the past, most companies want to either be AI enablers or AI adopters. And we believe that 2024 will be the year of the adopters. We scraped transcripts of the presentations at the conference and found that AI was mentioned 155 times.
There was a particular focus on Generative AI or Gen AI. And one of the means of adopting AI that was repeatedly mentioned was using chatbots for customer service. And chatbots can easily handle commonly asked questions without needing a customer service person to speak live. Kieran, can we start by talking about some of the most interesting ways companies and internet are adopting AI?
Kieran Kenny: So, there's a wide range of use cases so far. What we're seeing more recently is growing adoption for, to your point, AI assistance for customer support types of use cases. We're also seeing increased adoption from advertisers; for generative AI, for image and text creation for advertisements. And in the video game space, we're also seeing demand for generative AI based content creation tools -- to give you a sense of some of the use cases. The most common use case, though, is adoption …
-
AI, Scale and Privacy
11 maart 2024 · 3 min
Matt Cost of the firm’s U.S. Internet team shares his key takeaways from the 2024 Morgan Stanley Technology, Media & Telecom Conference, including the online ad market’s rebound and the future of property tech. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Matt Cost, from the Morgan Stanley US Internet team.
Along with my colleagues bringing you a variety of perspectives, today I’ll talk about some key trends that emerged in conversations with internet companies at Morgan Stanley’s 2024 Technology Media and Telecom Conference in San Francisco.
It’s Monday, Mar 11th at 8am in New York.
So, we had a busy four days at the conference last week. It was our biggest gathering yet for what’s really the marquee TMT event of the year. And we brought together companies and investors from all over the world for keynotes and meetings and a lot of moments in between to connect with industry insiders about the latest trends in their space.
I want to start with talking about AI. It was a big topic for almost every company we saw. But I’d say that for me, the video game companies stood out the most. Some C-suite executives that we spoke to talked about how their companies could become up to 30 per cent more efficient, as they leverage new AI tools to build and operate their games. But they also talked about the need to reinvest those efficiencies to make sure their products are the biggest, the best, and the most competitive they can be.
This is against a video game market backdrop that remains more mixed though we did hear about some green shoots in mobile games; since there are a number of newly launched games there that are getting good traction – which is actually something we haven’t seen in a few years at this point. On the M&A front, after a wave of game industry consolidation we’ve seen over the past few years, we did hear companies acknowledge that scale matters more than ever – if you want to compete in this space.
When it comes to the advertising …
-
M&A Rebound Ahead?
8 maart 2024 · 4 min
Our Head of Corporate Credit Research cites near-term and long-term factors indicating that investors should expect a major boost in merger and acquisition activity. 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, I'll be talking about trends across the global investment landscape, and how we put those ideas together.
It's Friday, March 8th at 2:00pm in London.
Usually, company activity follows the broader trends in markets. But last year, it diverged. 2023 was generally a strong year for economic growth and the stock market. But Mergers and Acquisition activity was anemic. By our count, global M&A activity in 2023, adjusted for the size of the economy, was the lowest in 30 years.
We think that’s going to change. There are both near-term and longer-term reasons why we think the buying and selling of companies can pick up. We think we’re going to see the return of M&A.
Near term, we think corporate confidence, which is essential to any large transaction, is improving. While stocks and the economy were ultimately strong last year, a lot of 2023 was still dominated by fears of rising yields, elevated inflation and persistent expectations of recession. Recall that as recently as October of 2023, the median stock in the S&P 500 was actually down about 5 per cent for the year.
All of those factors that were hitting corporate confidence, today are looking better. And with Morgan Stanley’s expectation for 2024, and economic soft landing, we think that improvement will continue. But don’t just take our word for it. The companies that traffic directly in M&A were notably more upbeat about their pipelines when they reported earnings in January.
Incidentally, this is also the message that we get from Morgan Stanley’s industry experts. We recently polled Morgan Stanley Equity Analysts across 150 industry groups around the wor…
-
Why European Data Centers Are Set for Major Growth
7 maart 2024 · 4 min
Morgan Stanley’s Europe Telecom Analyst outlines three factors pointing to a boom, the obstacles to overcome and the associated industries most likely to benefit. Lees meer
---- Transcript -----
Welcome to Thoughts on the Market. I'm Emmet Kelly, head of Morgan Stanley's European Telecom team. Today, I'll be talking about the rise of data centers in Europe.
The subject of data centers has, until now, largely been confined to the U.S. However, we believe that this is all about to change; and we also think the market significantly underestimates the size and scope of this potential growth in Europe.
Why do we believe that the European data center market is set for such strong growth? Well, we've identified three reasons.
The first reason is cloud computing. The primary driver of data center demand today is cloud and digitalization.
Cloud represents the lion's share of data center growth in Europe on our numbers. Roughly 60 percent of growth by 2035. The second driver is AI. What's interesting is training AI models needs to be done within a single data center, and that's driving demand for large data center campuses across the globe.
The third driver is data sovereignty. Data sovereignty is becoming increasingly important to both companies and also to consumers. Essentially, consumers want their data to be stored at home, and they want this to be subject to local law. A common parallel I've received is: would you want your bank account to be stored in a different country? The answer is probably no. And therefore, we believe that data will be increasingly near-shored across Europe
So what's limiting European data center growth today? There are a number of hurdles in place and these bottlenecks include energy, capital, planning permission, and also regulation
So how do we get around that? Well, having chatted with my colleagues in the utilities and renewables teams, it's been quite clear that Europe needs to invest a lot of money in renewable energy, up to 35 billion eur…
-
Three Long-Term Trends by the Numbers
6 maart 2024 · 3 min
Our Global Head of Fixed Income shares some startling data on decarbonization, the widespread use of AI and longevity. 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 key secular themes impacting markets.
It's Wednesday, Mar 6th at 10:30 am in New York.
We kicked off 2024 by highlighting the three secular themes we think will make the difference between being ahead of or behind the curve in markets – longevity, AI tech diffusion, and decarbonization.
How’s it going so far? We’ve got some initial insights and opportunities at the sector level worth sharing, and here they are through the lens of three big numbers.
The first number is €5 trillion – that’s how much our global economics and European utilities teams estimate will be spent in Europe by 2030 on efforts to decarbonize the energy system. These attempts will boost both growth and inflation, though by how much remains unclear. A more concrete investment takeaway is to focus on the sectors that will be on the receiving end of decarbonization spending: utilities and grid operators.
The second set of numbers are US$140 billion and US$77 billion – these are our colleagues' total addressable market projections for smart-chemo, over the next 15 years, and obesity treatments, by 2030. In terms of our longevity theme, we see companies increasingly investing in and achieving breakthroughs that can extend life. While the theme will have myriad macro impacts that we’re still exploring, the tangible takeaway here is that there are clear beneficiaries in pharma to pursue.
The last number we’re focusing on is US$500 billion. That’s the opportunity associated with a fivefold increase in the size of the European data center market out to 2035. That should be driven by the need to ramp up to deal with key tech trends, like Generativ…
-
How US Consumers Will Spend 2024 Tax Refunds
5 maart 2024 · 4 min
With tax season underway, our U.S. economist explains what the average refund will look like and how people are likely to spend it. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Sarah Wolfe, from the Morgan Stanley US Economics Team. Along with my colleagues bringing you a variety of perspectives, today I’ll talk about the US federal tax refunds season. It’s March 5, at 10 AM in New York.
The IRS began accepting tax returns for the 2023 tax year on January 29, 2024. This is about a week later than when they started accepting tax returns in 2023. As a result, the number of refunds and the total amount of refunds issued by the end of February is about 12 per cent below where they were at the same time last year. However, if we look at the average refund amount that households are getting in the third and fourth week of the tax refund season, they are about in line with the prior year.
As such, we expect that total refunds will ramp up to an average amount similar to last year; so that’s about $3100 per person. While data show that refunds can fluctuate notably on a weekly and daily basis, total tax refunds through the end of February ran about in line compared to the same period over the past five years. Let’s remember though that they’re not going to be as high as 2022 when refunds were much larger due to COVID-related stimulus programs. So, we can compare it to the past five years apart from 2022.
February through April remains the period where most tax refunds are received and spent, with the greatest impact on consumer spending in March. Our own AlphaWise survey of household intentions around the refunds reveals that households typically spend about a third of their refunds on everyday purchases – such as grocery, gas, apparel. Another third goes toward paying off debt, and the remaining third into savings.
Last year, higher inflation pushed more households to use their refunds on everyday purchases. This year, it is likely that everyday pur…
-
Hedging in a Robust Equity Market
4 maart 2024 · 5 min
The U.S. stock market is rising to new highs, but investors should still try to minimize risk in their portfolios. Our analysts list a few key strategies to navigate this dynamic. Lees meer
----- Transcript -----
Stephan Kessler: Welcome to Thoughts on the Market. I'm Stefan Kessler, Morgan Stanley's Global Head of Quantitative Investment Strategies Research, QIS Research in short.
Aris Tentes: And I am Aris Tentes, also from the QIS research team.
Stephan Kessler: Along with our colleagues bringing you a variety of perspectives, today we'll discuss different strategies to hedge equity portfolios.
It's Monday, the 4th of March at 10am in London.
The US equity market has been climbing to record levels, and it seems that long only investors -- and especially investors with long time horizons -- are inclined to keep their positions. But even in the current market environment, it still makes sense to take some risk off the table. With this in mind, we took a closer look at some of the potential hedging strategies for high conviction calls with a quantitative lens. Long only portfolios of high conviction names of opportunities for excess returns, or alpha; but also of exposures to broad market risk, or beta, embedded in these names.
While investors are keen to access the idiosyncratic excess return in individual stocks, they often overlook the systematic market and risk factors that come with owning stocks. Rather than treating these risks as uncontrolled noise, it makes sense to think about hedging such risks.
Aris, let me pass over to you for some popular approaches to hedging such risk exposures.
Aris Tentes: Yes, thank you, Stefan.
Today, investors can use a range of approaches to remove systematic risk exposures. The first one, and maybe the most established approach, is to hedge out broad market risks by shorting equity index futures. Now, this has the benefit of being a low-cost implementation due to the high liquidity of a futures contract.
Second, a more refin…
-
The Predictive Power of PMIs
1 maart 2024 · 4 min
Our head of Corporate Credit Research explains why the Purchasing Manager’s Index is a key indicator for investors to get a read on the economic outlook. 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, I'll be talking about trends across the global investment landscape, and how we put those ideas together.
It's Friday, March 1st at 2pm in London.
A perennial problem investors face is the tendency of markets to lead the economic data. We’re always on the lookout for indicators that can be more useful, and especially more useful at identifying turning points.
And so today, I want to give special attention to one of our favorite economic indicators for doing this: the Purchasing Manager Indices, or PMIs. And how they help with the challenge that economic data can sometimes give us.
PMIs works by surveying individuals working in the manufacturing and services sector – and asking them how they’re viewing current conditions across a variety of metrics: how much are they producing? How many orders are they seeing? Are prices going up or down? These sorts of surveys have been around for a while: the Institute of Supply Management has been running the most famous version of the manufacturing PMI since 1948.
But these PMIs have some intriguing properties that are especially helpful for investors looking to get an edge on the economic outlook.
First, the nature of manufacturing makes the sector cyclical and more sensitive to subtle turns of the economy. If we’re looking for something at the leading edge of the broader economic outlook, manufacturing PMI may just be that thing. And that’s a property that we think still applies -- even as manufacturing over time has become a much smaller part of the overall economic pie.
Second, the nature of the PMI survey and how it’s conducted – which asks questions whether conditions are…
-
Making Sense of Confusing Economic Data
1 maart 2024 · 4 min
Our Global Macro Strategist explains the complex nature of recent U.S. economic reports, and which figures should matter most to investors. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Matthew Hornbach, Morgan Stanley’s Global Head of Macro Strategy. Along with my colleagues bringing you a variety of perspectives, today I'll talk about what investors should take away from recent economic data.
It's Thursday, February 29, at 4pm in New York.
There’s been a string of confusing US inflation reports recently, and macro markets have reacted with vigor to the significant upside surprises in the data. Before these inflation reports, our economists thought that January Personal Consumption Expenditures inflation, or PCE inflation, would come at 0.23 per cent for the month.
On the back of the Consumer Price Index inflation report for January, our economists increased their PCE inflation forecast to 0.29 per cent month-over-month. Then after the Producers’ Price Index, or PPI inflation report, they revised that forecast even higher – to 0.43 per cent month-over-month. Today, core PCE inflation actually printed at 0.42 per cent - very close to our economists’ revised forecast.
That means the economy produced nearly twice as much inflation in January as our economists thought it would originally. The January CPI and PPI inflation reports seem to suggest that while inflation is off the record peaks it had reached, the path down is not going to be smooth and easy.
Now, the question is: How much weight should investors put on this data? The answer depends on how much weight Federal Open Market Committee participants place on it. After all, the way in which FOMC participants reacted to activity data in the third quarter of 2023 – which was to hold rates steady despite encouraging inflation data – sent US Treasury yields sharply higher.
Sometimes data is irrational. So we would take the recent inflation data with a grain of salt. Let me give you an example …
-
Should Investors Care About a Government Shutdown?
28 februari 2024 · 3 min
As the deadline to fund the government rapidly approaches, Michael Zezas explains what economic effect a possible shutdown could have and whether investors should be concerned. 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 market impacts of a potential US government shutdown.
It's Wednesday, February 28th at 2pm in New York.
Here we go again. The big effort in Washington D.C. this week is about avoiding a government shutdown. The deadline to pass funding bills to avoid this outcome is this weekend. And while many investors tell us they’re fatigued thinking about this issue, others still see the headlines and understandably have concerns about what this could mean for financial markets. Here’s our quick take on it, specifically why investors need not view this as a markets’ catalyst. At least not yet.
In the short term, a shutdown is not a major economic catalyst. Our economists have previously estimated that a shutdown shaves only about .05 percentage points off GDP growth per week, and the current shutdown risk would only affect a part of the government. So, it's difficult to say that this shutdown would mean a heck of a lot for the US growth trajectory or perhaps put the Fed on a more dovish path – boosting performance of bonds relative to stocks. A longer-term shutdown could have that kind of impact as the effects of less government money being spent and government employees missing paychecks can compound over time. But shutdowns beyond a few days are uncommon.
Another important distinction for investors is that a government shutdown is not the same as failing to raise the debt ceiling. So, it doesn’t create risk of missed payments on Treasuries. On the latter, the government is legally constrained as to raising money to pay its bills. But in the case of a shutdow…
-
Why Is the Price of Food Still Rising?
28 februari 2024 · 8 min
As grocery and dining costs continue to increase, our analysts break down how this has affected consumers and when food prices may stabilize. Lees meer
----- Transcript -----
Sarah Wolfe: Welcome to Thoughts on the Market. I'm Sarah Wolfe from the US economics team.
Simeon Gutman: And I'm Simeon Gutman; Hardlines, Broadlines, and Food Retail Analyst.
Sarah Wolfe: Today on the podcast, we'll discuss what's happening with food prices and how that's affecting the US consumer.
It's Tuesday, February 27th at 10am in New York.
It was almost exactly a year ago when I came on this podcast to talk about why eggs cost so much at the start of 2023. Here we are. It's a year later and food in the US still costs more. The overall inflation basket and personal consumption expenditures inflation was 2.6 per cent year over year in December; but dining out prices are still up 5.2 per cent. I'd like to admit that grocery prices are a little bit better. They're just a tad over 1 per cent. So we've seen a little bit more disinflation there. But overall food is still up and it's still expensive.
Simeon, can you give us a little bit more color on what's actually going on here?
Simeon Gutman: Yeah, so food prices measured by the CPI, as you mentioned, up about a per cent. The good news, Sarah, is that your eggs are actually deflating by about 30 per cent at the moment; so maybe you can buy a couple more eggs. But in general, we're following this descent that we started -- about almost two years ago where food prices were up double digits. A year ago, we were up mid single digits. And now we're down to this one per cent level. Looks like they're gonna hold. But so prices are coming in; but not necessarily deflating, but dis-inflating.
Sarah Wolfe: Can you help me understand that a little bit better? You mentioned that some commodity prices are coming down, like food prices. So why is overall inflation for food still rising? And dining out, grocery stores, both of them are still seeing price…
-
The Gap Between Corporate Haves and Have-Nots
26 februari 2024 · 4 min
Our Chief U.S. Equity Strategist reviews how the unusual mix of loose fiscal policy and tight monetary policy has benefited a small number of companies – and why investors should still look beyond the top five stocks. 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 investment implications of the unusual policy mix we face.
It's Monday, February 26th at 12pm in New York.
So let’s get after it.
Four years ago, I wrote a note entitled, The Other 1 Percenters, in which I discussed the ever-growing divide between the haves and have-nots. This divide was not limited to consumers but also included corporates as well. Fast forward to today, and it appears this gap has only gotten wider.
Real GDP growth is similar to back then, while nominal GDP growth is about 100 basis points higher due to inflation. Nevertheless, the earnings headwinds are just as strong despite higher nominal GDP – as many companies find it harder to pass along higher costs without damaging volumes. As a result, market performance is historically narrow. With the top five stocks accounting for a much higher percentage of the S&P 500 market cap than they did back in early 2020.
In short, the equity market understands that this economy is not that great for the average company or consumer but is working very well for the top 1 per cent.
In my view, the narrowness is also due to a very unusual mix of loose fiscal and tight monetary policy. Since the pandemic, the fiscal support for the economy has run very hot. Despite the fact we are operating in an extremely tight labor market, significant fiscal spending has continued.
In many ways, this hefty government spending may be working against the Fed. And could explain why the economy has been slow to respond to generationally aggressive interest rate hikes.
Most importantly, …
-
Eyeing a Market of Many
23 februari 2024 · 3 min
The valuations of stocks and corporate bonds, which have been driven largely by macroeconomic factors since 2020, are finally starting to reflect companies’ underlying performance. Our Head of Corporate Credit Research explains what that means for active investors. 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 trends across the global investment landscape – and how we put those ideas together.
It's Friday, February 23rd at 2pm in London.
In theory, investing in corporate securities like stocks or corporate bonds should be about, well, the performance of those companies. But since the outbreak of COVID in 2020, financial markets have often felt driven by other, higher powers. The last several years have seen a number of big picture questions in focus: How fast could the economy recover? How much quantitative easing or quantitative tightening would we see? Would high inflation eventually moderate? And, more recently, when would central banks stop hiking rates, and start to cut.
All of these are important, big picture questions. But you can see where a self-styled investor may feel a little frustrated. None of those debates, really, concerns the underlying performance of a company, and the factors that might distinguish a good operator from a bad one.
If you’ve shared this frustration, we have some good news. While these big-picture debates may still dominate the headlines, underlying performance is starting to tell a different story. We’re seeing an unusual amount of dispersion between individual equities and credits. It is becoming a market of many.
We see this in so-called pairwise correlation, or the average correlation between any two stocks in an equity index. Globally, that’s been unusually low relative to the last 15 years. Notably options markets are implying that this remains t…
-
Behind the Rapid Growth of the Private Credit Market
22 februari 2024 · 7 min
As traditional financial institutions tightened their lending standards last year, private credit stepped in to fill some of the gaps. But with rates now falling, public lenders are poised to compete again on the terrain that private credit has transformed. Lees meer
----- Transcript -----
Vishy Tirupattur: 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 we’ll have a conversation with Joyce Jiang, our US leveraged finance strategist, on the topic of private credit.
It's Thursday, February 22nd at noon in New York.
Joyce, thank you for joining. Private credit is all over the news. Let’s first understand – what is private credit. Can you define it for us?
Joyce Jiang: There isn't a consensus on the definition of private credit. But broadly speaking, private credit is a form of lending extended by non-bank lenders. It's negotiated privately on a bilateral basis or with a small number of lenders, bypassing the syndication process which is standard with public credit.
This is a rather broad definition and various types of debt can fall under this umbrella term; such as infrastructure, real estate, or asset-backed financing. But what's most relevant to leveraged finance – is direct lending loans to corporate borrowers.
Private credit lenders typically hold deals until maturity, and these loans aren't traded in the secondary market. So, funding costs in private credit tend to be higher as investors need to be compensated for the illiquidity risk. For example, between 2017 and now, the average spread premium of direct lending loans is 250 basis points higher compared to single B public loans.
Vishy Tirupattur: That’s very helpful Joyce. The size of the private credit market has indeed attracted significant attention due to its rapid growth. You often see estimates in the media of [the] size being around $1.5 to $1.7 trillion. Some market participan…
-
An Atlantic-Sized Divide in Monetary Policy
21 februari 2024 · 4 min
Central banks in the U.S. and Europe are looking to cut rates this year, but the path to those cuts differs greatly. Our Global Chief Economist explains this stark dichotomy. Lees meer
----- Transcript -----
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 challenges for monetary policy on both sides of the Atlantic.
It’s Wednesday, Feb 21st at 10am in New York.
The Fed, the Bank of England, and the ECB all hiked rates to fight inflation, and now we are looking for each of them to cut rates this year. For our call for a June Fed rate cut, both growth and inflation matter. But our call for a May and June start on the east side of the Atlantic depends only on inflation. “Data dependent” here has two different meanings.
At the January Fed meeting, Chair Powell said continued disinflation like in prior months was needed to cut. But he also emphasized that disinflation needs to be sustainably on track; not simply touching 2 per cent. Until Thursday’s retail sales data, the market narrative began to flirt with a possible re-acceleration of the US economy, spoiling that latter condition of inflation going sustainably to target. January inflation data showed strength in services in particular, and payrolls showed a tight labor market that might pick up steam.
The retail sales data pushed in the opposite direction, and we think that the slower growth will prevail over time. And for now, market pricing is more or less consistent with our call for 100 basis points of cuts this year, starting in June.
Now the Fed’s situation is in stark contrast to that of the Bank of England. Last week’s UK data showed a technical recession in the second half of 2023. And while the UK economy is not collapsing, a strongly surging economy is not a risk either. But until the last print, inflation in the UK had been stubbornly sticky. The January print came…
-
Accelerating the Shift from AI Enablers to AI Adopters
20 februari 2024 · 4 min
Our Head of Thematic Research in Europe previews the possible next phase of the AI revolution, and what investors should be monitoring as the technology gains adoption. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Edward Stanley, Morgan Stanley’s Head of Thematic Research in Europe. Along with my colleagues bringing you a variety of perspectives, today I’ll discuss the latest developments around AI Adopters. It’s Tuesday, February the 20th, at 2pm in London.
The current technology shift driven by AI is progressing faster than any tech shift that came before it.
I came on the show at the beginning of the year to present our thesis – while 2023 was the “Year of the Enablers,” those first line hardware and software companies; 2024 is going to be the “Year of the Adopters,” companies leveraging the Enablers’ hardware and software to better use and monetize their own data for this generative AI world.
And the market is still sort of treating this as a “show me” story. Enablers are still driving returns. Around half of the S&P’s performance this year can be attributed to three Enabler stocks. Yet, be it Consumer or – more importantly – Enterprise adoption, monthly data we’re tracking suggests AI adoption is continuing at a rapid pace.
So let me paint a picture of what we’re actually seeing so far this year.
There has been a widening array of consumer-facing chatbots. Some better for general purpose questions; some better at dealing with maths or travel itineraries; others specialized for creating images or videos for influencers or content creators. But those proving to be the stickiest, or more importantly leading to major behavioral day-to-day changes, are coding assistants, where the productivity upside is now a well-documented greater than 50 per cent efficiency gain.
From a more enterprise perspective, open-source models are interesting to track. And we do, almost daily, to see what’s going on. The people and companies downloading these mode…
-
Commercial Real Estate's Uncertain Future
16 februari 2024 · 4 min
Our Fixed Income Strategist outlines commercial real estate’s post-pandemic challenges, which could make regional bank lenders vulnerable. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market, I’m Vishy Tirupattur, Morgan Stanley’s Chief Fixed Income Strategist. Along with my colleagues bringing you a variety of perspectives, I'll be talking about the challenges of the commercial real estate markets. It's Friday, Feb 16th at 3 pm in New York.
Commercial real estate – CRE in short – is back in the spotlight in the aftermath of the loan losses and dividend cuts announced by New York Community Bancorp. Lenders and investors in Japan, Germany, and Canada have also reported sizable credit losses or write-downs related to US commercial real estate. The challenges in CRE have been on a slow burn for several quarters. In our view, the CRE issues should be scrutinized through the lenses of both lenders and property types. We see meaningful challenges in both of them.
From the lenders’ perspective, we now estimate that about a trillion and a half of commercial real estate debt matures by the end of 2025 and needs to be refinanced; about half of this sits on bank balance sheets.
The regulatory landscape for regional banks is changing dramatically. While the timeline for implementing these changes is not finalized, the proposed changes could raise the cost of regional bank liabilities and limit their ability to deploy capital; thereby pressuring margins and profitability. This suggests that the largest commercial real estate lender – the regional banking sector – might be the most vulnerable.
Office as a property type is confronting a secular challenge. The pandemic brought meaningful changes to workplace practice. Hybrid work has now evolved into the norm, with most workers coming into the office only a few days a week, even as other outdoor activities such as air travel or dining out have returned to their pre-Covid patterns. This means that property valuations, le…
-
What the U.S. Election Could Mean for NATO
15 februari 2024 · 3 min
Michael Zezas, Global Head of Fixed Income and Thematic Research, gives his take on how the U.S. election may influence European policy on national security, with implications for the defense and cybersecurity sectors. 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 impact of the US election on global security and markets. It's Thursday, February 15th at 3pm in New York.
Last week I was in London, spending time with clients who – understandably – are starting to plan for the potential impacts of the US election. A common question was how much could change around current partnerships between the US and Europe on national security and trade ties, in the event that Republicans win the White House. The concern is fed by a raft of media attention to the statements of Republican candidate, Former President Trump, that are skeptical of some of the multinational institutions that the US is involved in – such as the North Atlantic Treaty Organization, or NATO. Investors are naturally concerned about whether a new Trump administration could meaningfully change the US-Europe relationship. In short, the answer is yes. But there’s some important context to keep in mind before jumping to major investment conclusions.
For example, Congress passed a law last year requiring a two-thirds vote to affirm any exit from NATO, which we think is too high a hurdle to clear given the bipartisan consensus favoring NATO membership. So, a chaotic outcome for global security caused by the dissolution of NATO isn’t likely, in our view.
That said, an outcome where Europe and other US allies increasingly feel as if they have to chart their own course on defense is plausible even if the US doesn’t leave NATO. A combination of President Trump’s rhetoric on NATO, a possible shift in the US’s approach to t…
-
The Rising Risk of Global Trade Tensions for Asia
15 februari 2024 · 3 min
Key developments in China and the U.S. will impact global trade and the growth outlook for Asia in 2024. 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 the risk of re-emerging trade tensions and how this might impact the growth outlook for Asia. It’s Thursday, Feb 15, at 9 AM in Hong Kong.
Trade tensions took a back seat during the pandemic when supply-chain disruptions led to a mismatch in the supply-demand of goods and created inflationary pressures around the world. However, these inflationary pressures are now receding and, in addition, there are two developments that we think may cause trade tensions to emerge once again.
First is China’s over-investment and excess capacity. China continues to expand manufacturing capacity at a time when domestic demand is weakening and its producers are continuing to push excess supply to the rest of the world.
China’s role as a large end-market and sizeable competitor means it holds significant influence over pricing power in other parts of the world. This is especially the case in sectors where China’s exports represent significant market share.
For instance, China is already a formidable competitor in traditional, lower value-added segments like household appliances, furniture, and clothing. But it has also emerged as a leading competitor in new strategic sectors where it is competing head-on with the Developed Market economies. Take sectors related to energy transition.
China has already begun cutting prices for key manufactured goods, such as cars, solar cells, lithium batteries and older-generation semiconductors over the last two quarters.
The second development is the upcoming US presidential election. The media is reporting that if reelected, former President Trump would consider trade policy options, such as imposing additional tariffs on imports from China, o…
-
Ripple Effects of the Red Sea Disruptions
14 februari 2024 · 9 min
Our expert panel discusses how the Red Sea situation is affecting the global economy and equity markets, as well as key sectors and the shipping industry. Lees meer
----- Transcript -----
Jens Eisenschmidt: Welcome to Thoughts on the Market. I am Jens Eisenschmidt, Morgan Stanley's Chief Europe Economist.
Marina Zavolock: And I'm Marina Zavolock, Chief European Equity Strategist.
Cedar Ekblom: And I'm Cedar Ekblom, Shipping and Logistics Analyst.
Jens Eisenschmidt: And on this special episode of the podcast, we will discuss the ongoing Red Sea disruptions and the various markets and economic dislocations caused by it. It's Tuesday, February 13th, 6pm in Frankfurt.
Marina Zavolock: And 5pm in London.
Marina Zavolock: 12 per cent of global trade and 30 per cent of container trade passes through the Suez Canal in Egypt, which connects the Mediterranean Sea and the Red Sea. Safety concerns stemming from the recent attacks on commercial ships in the Red Sea have driven the majority of container liners to divert trade around the Cape of Good Hope, pushing up container freight rates more than 200 per cent versus December of last year on the Asia to Europe route.
Last week, our colleague Michael Zezas touched briefly on the situation in the Red Sea. Now we'd like to dig deeper and examine this from three key lenses. The European economy, the impact on equity markets and industries, as well as on global container shipping in particular.
Marina Zavolock: So Cedar, let's start with you. You’ve had a high conviction call since freight rates peaked in the middle of January – that container shipping rates overshot and were likely to decline. We've started to see the decline. How do you see this developing from here?
Cedar Ekblom: Thanks, Marina. Well, if we take a step back and we think about how far container rates have come from the peak, we're about 15 per cent lower than where we were in the middle of January. But we're still nearly 200 per cent ahead of where we were on the…
-
Three Reasons the U.S. Consumer Outlook Remains Strong
12 februari 2024 · 3 min
Despite a likely softening of the labor market, U.S. consumer spending should remain healthy for 2024. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Sarah Wolfe from the US Economics Team. Along with my colleagues bringing you a variety of perspectives; today I’ll give you an update on the US consumer. It’s Monday, February 12, at 10 AM in New York.
Lately, there's been a lot of mixed data on the health of the US consumer. We saw a very strong holiday spending in November and December; very strong jobs reports in recent months. But we’re forecasting somewhat softer data in January for retail sales. And we know that delinquencies have been rising for households.
When we look towards the rest of 2024, we're still expecting a healthy US consumer based on three key factors.
The first is the labor market. Obviously, the labor market has been holding up very well and we’ve actually been seeing a reacceleration in payrolls in the last few months. What this means is that real disposable income has been stronger, and it’s going to remain solid in our forecast horizon. We do overall expect some cooling in disposable income though, as the labor market softens. Overall, this is the most important thing though for consumer spending. If people have jobs, they spend money.
The second is interest rates. This has actually been one of the key calls for why we did not expect the US consumer to be in a recession two and half years ago, when the Fed started raising interest rates. There’s a substantial amount of fixed rate debt, and as a result less sensitivity to debt service obligations. We estimate that 90 per cent of household debt is locked in at a fixed rate. So over the last couple of years, as the Fed has been raising interest rates, we’ve seen just that: less sensitivity to higher interest rates. Right now, debt service costs are still below their 2019 levels. We’re expecting to see a little upward pressure here over the course of this year – as rates are…
-
Rooting for a Positive Rate of Change
9 februari 2024 · 3 min
Investors in credit markets pay close attention to the latest economic data. Our head of Corporate Credit Research explains why they should be less focused on the newest numbers and more focused on whether and how those numbers are changing. 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, I'll be talking about trends across the global investment landscape, and how we put those ideas together. It's Friday, February 9th at 2pm in London.
Almost every week, investors are confronted with a host of economic data. A perennial question hovers over each release: should we focus more on the level of that particular economic indicator; or its rate of change. In many cases, we find that the rate of change is more important for credit. If so, recent data has brought some encouraging developments with surveys of US Manufacturing, as well as bank lending.
I’m mindful that the concept of “economic data” is about as abstract as you can get. So let’s dig into those specific manufacturing and lending releases. Every quarter, the Federal Reserve conducts what is known as their Senior Loan Officer [Opinion] Survey, where they ask senior loan officers – at banks – about how they’re doing their lending. The most recent release showed that more officers are tightening their lending standards than easing them. But the balance between the two is actually getting a little better, or looser, than last quarter. So, should we care more about the fact that lending standards are tight? Or that they’re getting a little less tight than before?
Or consider the Purchasing Managers Index, or PMI, from the Institute of Supply Management. This is a survey of purchasing managers at American manufacturers, asking them about business conditions. The latest readings show conditions are still weaker than normal. But things are getting better, and have im…
-
Trends in the 2024 Credit Landscape
8 februari 2024 · 8 min
Our credit experts from Research and Investment Management give their overview of private and public credit markets, comparing their strengths and weaknesses following two years of rate hikes. Lees meer
----- Transcript -----
Vishy Tirupattur: Welcome to Thoughts on the Market. I am Vishy Tirupattur, Chief Fixed Income Strategist in Morgan Stanley Research.
David Miller: And I'm David Miller, Head of Global Private Credit and Equity for Morgan Stanley Investment Management.
Vishy Tirupattur: And on this special edition of the podcast, we'll be taking a deep dive into the 2024 credit landscape, both from a private credit and public credit perspective.
Vishy Tirupattur: So, David, you and I come at credit from two different avenues and roles. I cover credit, and other areas of fixed income, from a sell side research perspective. And you work for our investment management division, covering both private credit and private equity. Just to set the table for our listeners, maybe we could start off by you telling listeners how private credit investing differs from public credit.
David Miller: Great. The main differences are: First, privately negotiated loans between lenders and borrowers. They're typically closely held versus widely distributed in public credit. The loans are typically held to maturity and those strategies are typically has that long duration, sort of look. Private credit -- really -- has three things of why their borrowers are valuing it. Certainty, that's committed capital; certainty of pricing. There's speed. There's no ratings -- fewer parties, working on deals. And then flexibility -- structures can be created to meet the needs of borrowers versus more highly standardized parts of the public credit spectrum. Lastly and importantly, you typically get an illiquidity premium in private credit for that holding to maturity and not being able to trade.
Vishy Tirupattur: So, as we look forward to 2024, from your perspective, David, what would you say are some …
-
Which Geopolitical Events Matter Most to Investors
7 februari 2024 · 3 min
With multiple, ongoing geopolitical conflicts, our analyst says investors should separate signals from noise in how these events can impact markets. Lees meer
Important note regarding economic sanctions. This research may reference jurisdiction(s) or person(s) which are the subject of sanctions administered or enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the United Kingdom, the European Union and/or by other countries and multi-national bodies. Any references in this report to jurisdictions, persons (individuals or entities), debt or equity instruments, or projects that may be covered by such sanctions are strictly incidental to general coverage of the relevant economic sector as germane to its overall financial outlook, and should not be read as recommending or advising as to any investment activities in relation to such jurisdictions, persons, instruments, or projects. Users of this report are solely responsible for ensuring that their investment activities are carried out in compliance with applicable sanctions.
----- 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, I'll be talking about the impact of geopolitical events on markets. It's Wednesday, February 7 at 5 pm in London.
Geopolitical conflicts around the globe seem to be escalating in recent weeks. Increased US military involvement in the Middle East, fresh uncertainty about Ukraine’s resources in its conflict with Russia, and lingering concerns about the US-China relationship are in focus. And since financial markets and economies around the world have become more interconnected, it's more important than ever for investors to separate signals from noise in how these events can impact markets. So here’s a few key takeaways that, in our view, do just that.
First, fighting in the red sea may influence the supply …
-
What Japan Can Teach the World About Longevity
7 februari 2024 · 10 min
Japan’s experience as one of the first countries to have an aging population offers a glimpse of what’s to come for other countries on the same path. See what an older population could mean in terms of social policy, productivity, immigration reform, medical costs and more. Lees meer
----- Transcript -----
Seth Carpenter: Welcome to Thoughts on the Market. I'm Seth Carpenter, Morgan Stanley's Global Chief Economist.
Robert Feldman: And I'm Robert Feldman, Senior Advisor at Morgan Stanley MUFG Securities.
Seth Carpenter: And on this special episode of the podcast, we will talk about longevity, and what the rest of the world can learn from Japan. It’s Tuesday, February 6th, at 8 a. m. in New York.
Robert Feldman: And it's 10 p. m. in Tokyo.
Seth Carpenter: Over the past year, I am guessing that lots of listeners to this podcast have heard many, many stories about new anti obesity drugs, cutting edge cancer treatments. And so today, we're going to address what is perhaps a bigger theme at play here.
Now, the micro human side of things is clearly huge, clearly important. But Robert and I are macroeconomists, and so we're going to think about what the potential for longer human lifespans is. For the economics. So as life spans increase, we're probably going to see micro and macro ramifications for demographics, consumer habits, the healthcare system, government spending, and long-term financial planning.
And so, it follows that investors may want to consider these ramifications across a wide range of sectors. So, Robert, I wanted to talk to you in particular because you've been following this theme in your research on Japan -- which is perhaps at the earliest stage of this with the fastest aging population across developed economies.
So, start us off. Perhaps share some more about the demographic challenges that Japan is facing and what's unique about their experience.
Robert Feldman: Thanks, Seth. First, let me start by saying that Japan is not so much unique as it is …
-
A Longer Wait for Rate Cuts?
6 februari 2024 · 4 min
As positive economic data makes it less likely that the Fed will cut rates in March, our Chief US Equity Strategist explains what this could mean for small-cap stocks. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Mike Wilson, Chief Investment Officer and Chief U. S. Equity Strategist for Morgan Stanley. Along with my colleagues bringing a variety of perspectives, I'll be talking about the latest trends in the financial marketplace. It's Monday, February 5th at 11 am in New York.
So let's get after it.
Going into the last week, investors had a number of factors to consider. The busiest week of earnings season that included several mega cap tech stocks, a Fed meeting, and some of the most relevant monthly economic data for markets. Around these data releases, we saw significant moves in many macro markets, as well as individual securities.
We started the week with a soft Dallas Fed Manufacturing Index reading, which followed the weak New York Manufacturing Survey two weeks earlier. Meanwhile, the Conference Board Consumer Confidence Index and the University of Michigan Consumer Sentiment Survey both pushed higher.
As the week progressed, we got more data that supported the view that the economy may not be slowing as much as many had started to believe, including perhaps the Fed. In contrast to the Dallas and New York Fed Manufacturing Surveys, The ISM manufacturing PMI ticked higher, and surprised to the upside by a few points.
More importantly, the orders component ticked above 50 to 52, which tends to lead the headline index. The fact that the overall equity market responded favorably to these data makes sense in the context of still present growth uncertainty. However, the fact that cyclical stocks that are levered to manufacturing continue to underperform tells me the market is still very undecided about the macro outcome this year -- as am I.
Finally, the headline non-farm payrolls number on Friday was extremely strong at 353, 000. Manuf…
-
Is the Housing Market Back?
2 februari 2024 · 6 min
Mortgage rates are down, sales volumes are rising and housing is gradually getting more affordable. Our analysts discuss why they think the U.S. housing market is on a healthy foundation. Lees meer
----- Transcript -----
Jim Egan: Welcome to Thoughts on the Market. I'm Jim Egan, Co Head of Securitized Products Research at Morgan Stanley.
Jay Bacow: And I'm Jay Bacow, the other Co Head of Securitized Products Research.
Jim Egan: And on this episode of the podcast, we'll be talking about mortgage rates, home sales volumes and the U. S. housing market.
Jay Bacow: Alright Jim. Mortgage rates are down. Sales volumes are up. [Is] the housing market back?
Jim Egan: Sales volumes might finally be inflecting higher, or at least they might actually be finding that bottom. If we look at the seasonally adjusted annualized figures that came in in December, pending home sales increased 8 per cent to their highest level since July. Purchase applications, which -- little bit more high frequency, we have them through January -- they're up 23 percent from the lows that they put in in late October or early November.
Jay Bacow: Alright, that sounds good, but seasonally adjusted annualized figure sounds like a mouthful. Can you lay that out a little easier for us?
Jim Egan: I think that these numbers just need to be put [00:01:00] into a little bit more context. Yes, pending home sales were up 8 per cent month over month. But if I look at just the December print, it was the weakest pending home sales print for that month in the history of that index. Now, relative to 2022, it is improving. It was only down 1 per cent from December of 2022, and that's the lowest decrease we've had since 2021. But these numbers still aren't strong.
Going around the horn to some of the other demand statistics, existing home sales finished 2023 down 19 per cent. But they also strengthened into year end only down 9 per cent in the fourth quarter. New home sales, as we've mentioned on this podcast before. Tha…
-
How Longevity Is Influencing Consumer Spending
1 februari 2024 · 4 min
Our analyst explains what parts of the consumer staples sector could benefit from an aging global population. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I’m Sarah Simon, Head of the European consumer staples team at Morgan Stanley, and today I’ll be talking the increasingly important longevity theme and its impact on consumers. It’s Thursday, the first of February, at 3 PM in London.
It's no secret that global life expectancy is increasing. The rise of modern medicine, improved working conditions, urbanization, and greater access to food and water have all contributed to a greater life expectancy. According to the United Nations, global life expectancy has risen more than 54% since 1950, reaching about 71 years in 2021, with Asia improving the most.
At the same time people are living longer, birth rates for most developed economies have dropped. Higher levels of education, the increasing proportion of women in the workforce, and modern medicine have all contributed to lower birth rates. In fact, over the last several decades, the global population has aged significantly, with the median global age increasing 8 years since 1950, hitting 30 years in 2021. Looking ahead, the United Nations expects the percentage of population aged 65+ will continue to increase at a faster rate than younger populations.
An ageing population has far-reaching implications, but let’s consider the spending power of older adults. Real disposable income among older adults has increased throughout the years. In 2022, an older adult had about 50% more than in 2000. As a result, older adults today have more money to spend on consumer goods and services than in the last decades. Here are three categories within the Consumer Staples sector that could benefit from the rise in longevity.
First, Consumer Health. As consumers skew older and their disposable income increases it bodes well for a wide range of consumer health products – think Vitamins, Minerals and Supplements (VMS)…
-
Is M&A Ready to Bounce Back?
1 februari 2024 · 8 min
While 2023 was an active year for U.S. mergers and acquisitions, according to Wally Cheng, Head of West Coast M&A in our Technology Investment Banking Group, 2024 is positioned to be a busy year. Lees meer
Wally Cheng is not a member of Morgan Stanley’s Research department. Unless otherwise indicated, his views are his own and may differ from the views of the Morgan Stanley Research department and from the views of others within Morgan Stanley.
----- Transcript -----
Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Global Head of Fixed Income and Thematic Research.
Wally Cheng: And I'm Wally Cheng, Head of West Coast Tech M&A for Investment Banking.
Michael Zezas: And on this special episode of Thoughts on the Market, we'll focus on the outlook ahead for mergers and acquisitions in US tech.
Michael Zezas: Wally, I really wanted to talk with you because 2023 was arguably the toughest year for U.S. mergers and acquisition markets since the global financial crisis. And we saw a three prong set of challenges in the form of rising interest rates, geopolitical conflicts and recession concerns. And that seems to have weighed on deal activity across the globe. Looking back, the first quarter of 2023 marked the lowest point of the M&A market, and since then we've seen deal activity tick higher. But from your perspective in tech banking, where are we right now and what should investors be watching for this year?
Wally Cheng: The punch line answer that, Mike, is they should be looking for a bounce back in M&A in 2024 for all the reasons that you mentioned. Activity was very muted in 23. You highlighted rising interest rates. You highlighted geopolitical risks, wars, etc.. In that kind of environment deals just don't get done. There's not a meeting of the minds between buyer and seller. We're in a different environment now, I think what's happened over the last quarter or so is an appreciation or an acceptance of the new normal. The world has …
-
Markets Are Ready for More Bonds
30 januari 2024 · 3 min
Who is going to buy nearly $11 trillion in new fixed-income assets in 2024? Find out where our Chief Cross-Asset strategist expects to see demand. 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 our outlook for global fixed income supply and demand in 2024. It's Tuesday, January 30th at 10 a.m. in New York.
This year is shaping out to be a big year for bond markets. We see global fixed income growth supply rising 12% to almost $11 trillion in 2024, and expect U.S. Treasury gross supply alone to increase 30% to $4 trillion in 2024. So the big questions investors are grappling with are one, what drives this increase in supply? And two, will there be sufficient demand and from where to meet the supply?
One of the drivers for this rise in supply is quantitative tightening or QT. As G4 central banks have undertaken aggressive measures to curb inflation, they've shrunk their balance sheets by about $250 trillion. Yes, that's trillion with a T, since January 2023, and we expect them to do so by another $245 trillion in 2024. With central bank buying of coupon bonds dropping off, someone else will need to step in.
A prevailing narrative in 2023 was that markets would get overwhelmed by the amount of fixed income issuance, either because of quantitative tightening or maturing corporate bonds, and this would push yields higher. Yields were indeed pushed higher last year, but it wasn't on the back of supply, instead, the economy turned out to be stronger than expected. And we think that 2024 will be no different. Gross and net issuance across global fixed income products will likely rise versus last year, but demand should be there to meet supply, especially in the second half of 2024, when central banks are expected to start cutting rates and rates volatility normalizes.
With that said, what is interesting to note…
-
Opportunities in Corporate Credit for 2024
30 januari 2024 · 9 min
With the rise of technology, media and telecom credit markets, our analyst explains how companies are looking to manage the rapidly changing landscape. Lees meer
----- Transcript -----
Andrew Sheets: Welcome to Thoughts on the Market. I'm Andrew Sheets, Head of Corporate Credit Research at Morgan Stanley.
David Hamburger: And I'm David Hamburger, Head of U.S. Sector Corporate Credit Research and Lead Analyst for High Yield TMT here at Morgan Stanley.
Andrew Sheets: And on today's special episode, the podcast, Dave and I will be discussing corporate credit analysis, the TMT sector and what may be ahead for credit investors.
Andrew Sheets: David, I think it's safe to say that a lot of listeners are going to be a lot more familiar with what an equity analyst does. So before we get into your sector, I think it'd be great to just take a step back and how do you think about the role of a credit analyst, and how does your job differ from your equity analyst colleagues that sit across on the other side of the floor?
David Hamburger: So, you know, we're primarily focused on the other side of the balance sheet compared to the equity analyst. So we'll be looking at the liabilities that companies have. Those liabilities do trade in the market and people invest in bonds, loans and otherwise. And importantly, the thing that we really do focus on the most is a company's willingness and ability to service debt and repay that debt. We are certainly concerned with how companies generate shareholder value. But importantly, it's really, really crucial and critical to understand a company's ability again and willingness to repay the debt that's on the balance sheet and the liability part of the balance sheet in particular.
Andrew Sheets: We're also coming into 2024 at a pretty interesting time for corporate credit markets. You know, you've had yields on some of these high yield bond issuers or loan issuers, a double from where they were in 2021/2022. So you have a market that is offering …
-
Why It’s Time to Be Bullish on European Equities
26 januari 2024 · 4 min
Listen as our strategist cites which present-day factors and historical precedents should have investors expecting a big year in European equities. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Marina Zavolock, Morgan Stanley's Chief European Equity Strategist. Along with my colleagues bringing you a variety of perspectives, today I'll be discussing our new approach to European equity markets. It's Friday, January 26th at 4:00 pm in London.
My team and I recently launched coverage of European equities, with a goal of offering investors a more dynamic and modern approach to stocks in the region. Bottom line we're bullish on European equities and see 11% upside to our year end target for MSCI Europe. This rises to 16% on a total return basis if we incorporate dividends and buybacks. Let me walk you through our thinking.
We seek to bring traditional equity strategist to the modern data era by blending traditional European equity strategy metrics such as a focus on PMIs, valuations, flows, etc., with bottom up data driven analysis, unconventional factors, an in-depth cycle playbook and integration of important thematics such as AI diffusion, the rise of European M&A and geopolitics.
For our cycle playbook, we worked closely with our global economics team to determine which specific cycle in long term history is most similar to today. Our work led us to the mid 1990s and specifically 1995, a soft landing in the US and a soft-ish, still very weak growth environment in Europe. This was a period where there was a major focus by market participants over rates and inflation, bad macroeconomic data was seen as good given its implication for future rate cuts, and there was an undercurrent of technological innovation. Other similarities included overoptimistic market pricing on fed rate cuts after the pivot, a later pivot from European central banks, and concerns about deficit reduction and a budget deal in the US.
After an initial sharp Fed pivot related …
-
Will the U.S. Presidential Election Change Fed Policy?
25 januari 2024 · 7 min
Investors are concerned that the upcoming election might interfere with policy decisions. Here’s why our view is different. Lees meer
----- Transcript -----
Matthew Hornbach: Welcome to Thoughts on the Market. I'm Matthew Hornbach, Global Head of Macro Strategy at Morgan Stanley.
Seth Carpenter: And I'm Seth Carpenter, Morgan Stanley's Global Chief Economist.
Matthew Hornbach: And on this episode of the podcast, we'll discuss whether the election will change Fed policy this year. It's Thursday, January 25th at 10 a.m. in New York.
Matthew Hornbach: All eyes are on the Fed as 2024 gets underway. Investors are concerned not only about the timing and the magnitude of the expected rate cuts this year, but also on the liquidity in the funding markets, which is intricately linked to the Fed's ongoing quantitative tightening operations, or QT. Seth, let's dig right into it. Does the outcome of the US presidential election in November change your team's baseline view that the Fed will lower rates starting in June?
Seth Carpenter: Matt, I think the short answer to your question is no. So our baseline forecast is, the Fed starts cutting rates in June. And over the second half of the year, it gets a total of 100 basis points worth of cuts in. But that forecast is predicated on the downward trajectory for inflation and the economy's slowing but not falling off of a cliff, or put simply, it's based on the Fed following their statutory objectives for stable prices and full employment, and not the political cycle.
Matthew Hornbach: So, Seth, we often hear from investors that they believe that the election will have an impact on Fed policy and we also hear from FOMC participants from time to time about this topic. But why is it that FOMC participants dismiss this wisdom or conventional wisdom amongst investors that the election might interfere with Fed policy?
Seth Carpenter: I think that question has a really simple answer, which is that the FOMC participants, they're the ones sitt…
-
What Matters Most to Markets in the U.S. Election
24 januari 2024 · 3 min
While it’s too early to tell who will win the U.S. presidential election – or how markets will respond to it – there are a few factors that investors should consider. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research for Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, I'll be talking about the impact of the US election on markets. It's Wednesday, January 24th at 10 a.m. in New York.
We're two states into the Republican primary election season. Former President Trump has won both contests, underscoring what polls have been suggesting for months now. That he's the heavy favorite to be the party's nominee for the presidency. But other than that, have we learned anything that might matter to markets? Not particularly in our view. This election will clearly be consequential, the markets, but for the moment we're more in watch and learn mode. Here's two reasons to consider.
First, knowing who the Republican candidate will be doesn't tell us much about who will become president. While we've heard from some clients that they rate President Biden's chances of reelection as low, and therefore, knowing who will be the Republican nominee is the same as knowing who will be president, we don't agree with this logic. Sitting presidents have had low approval ratings this far ahead of an election and still won before. Also, polls may show that economic factors like inflation are a political weakness for Biden today, but those circumstances could change given how quickly inflation is easing. Now, this doesn't mean we expect Biden will win, it's just that we think it's far from clear who the favorite is in this election.
Our second point is that, even if we know who wins, we don't necessarily know what reliable market impact this would have. That's because there are many crosscurrents to the policies each party is pursuing. Democrats may be interested in more social s…
-
Taking the Long View
23 januari 2024 · 9 min
Lisa Shalett, Chief Investment Officer of Morgan Stanley Wealth Management, discusses long-term investors’ biggest concern – the amount and timing of interest rate moves. Lees meer
Lisa Shalett is a member of Morgan Stanley’s Wealth Management Division and is not a member of Morgan Stanley’s Research Department. Unless otherwise indicated, her views are her own and may differ from the views of the Morgan Stanley Research Department and from the views of others within Morgan Stanley.
----- Transcription -----
Andrew Sheets: Welcome to Thoughts on the Market. I'm Andrew Sheets, Head of Corporate Credit Research at Morgan Stanley.
Lisa Shalett: And I'm Lisa Shalett, Chief Investment Officer for Morgan Stanley Wealth Management.
Andrew Sheets: And on this special episode of the podcast, we'll be discussing some of the latest market trends and what they may mean for our retail clients. It's Tuesday, January 23rd at 4 p.m. in London.
Lisa Shalett: And it's 11 a.m. here in New York.
Andrew Sheets: Lisa, it's great to have you back on. So wealth management clients are typically investing for the long term in order to meet specific goals such as retirement. And with that in mind, let's start with the current market backdrop. You know, we've entered the year with increased market confidence. We've seen implied volatility near some of the lowest levels that we've seen in several years. And yet we've also seen some mixed economic data to start the year. So as you look out into 2024, what are the major risks that you're focused on?
Lisa Shalett: Well, I think one of the first things that, you know, we're trying to impress upon our clients, who tend to be long term, who tend to be multi-asset class investors, very often owning a simple classical 60/40 portfolio, is that we've been in this very interesting potential regime change, where both bonds and stocks are sensitive to the same thing. And that is the level and rate of change of interest rates. And that's meant that the 60/40 …
-
Chasing the End of the Economic Cycle
22 januari 2024 · 4 min
As the current economic cycle plays out, history suggests that stock prices could be in for large price swings in both directions. Lees meer
----- Transcript -----
Welcome to Thoughts on the Market. I'm Mike Wilson, Chief Investment Officer and Chief U.S. Equity Strategist for Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, I'll be talking about the latest trends in the financial marketplace. It's Monday, January 22nd at 11am in New York. So let's get after it.
For the past several weeks, we've engaged with many clients from very different disciplines about our outlook for 2024. From these conversations, the primary takeaway is that there isn't much conviction about how this year will play out or how to position one's portfolio. After one of the biggest rallies in history in both bonds and stocks to finish the year, there's a sense that markets need to take a rest before the next theme emerges. Our view isn't that different, except that from our perspective, not much has changed from three months ago other than the price of most assets.
In our view, we remain very much in a late cycle environment, during which markets will oscillate between good and bad outcomes for the economy. The data continue to support this view, with both positive and negative reports on the economy, earnings and other risk factors. However, as noted, the price of assets are materially higher than three months ago, mainly due to the Fed's pivot from higher for longer, to we're done hiking and likely to be easing in 2024. In addition to the timing and pace of interest rate cuts, investors are also starting to ponder if and when the Fed will end its quantitative tightening or QT campaign. Since embarking on this latest round of QT, the Fed's balance sheet has shrunk by approximately $1.5 trillion. However, it's still $500 billion above the June 2020 levels immediately after the $3 trillion surge to offset the Covid lockdowns. To say that the Fed's balance sheet is nor…