Morgan Stanley’s strategists see US stocks and bonds outperforming their emerging markets peers next year, according to a note to clients.
“We expect US earnings growth to trough in early 2024 and rebound thereafter,” strategists including Serena Tang and Vishwanath Tirupattur wrote. US growth may stay strong relative to other regions, with emerging markets growth likely to disappoint, they said.
Morgan Stanley recommends a “barbell of defensive growth and late-cycle cyclicals” and sees the S&P 500 Index at 4,500 at the end of next year. It closed at 4,415.24 on Friday. It also added that policymakers will need to get the balance correct between “tightening just enough and easing quickly enough.”
The optimistic outlook for next year would mark a turnaround in the bearish view of US stocks as investors fret about the impact of higher-for-longer interest rates. Until recently Morgan Stanley’s Michael Wilson — one of Wall Street’s most prominent bearish voices — maintained the bank’s longstanding target for the S&P 500 at 3,900 for this year-end.
“Unlike the prior two years where we had a strong RoW > US preference, 2024 is different,” the note said about next year’s asset allocations, referring to the US versus the rest of the world. “Risk-off sentiment in first half also drives safe-haven demand for US dollar and US dollar-denominated assets.”
The strategists also see the likelihood of US bonds turning more attractive than a year ago on the back of “easier” policies. Yields may fall through 2024 — with those on the 10-year Treasury reaching 3.95% — as markets price in the start of rate-cut cycles. They forecast the Federal Reserve to make its first rate cut in June.
Meanwhile, Morgan Stanley is cautious on emerging markets’ fixed income and sees limited prospects for a recovery in EM local bonds without a recovery in Treasuries.
“EM returns look less than compelling across stocks, credit, and local rates,” the strategists wrote. “Geopolitics will weigh on some countries. And the potential for China entering a debt-deflation loop remains a headwind to EM outperformance.”
Wealth Consulting Group, Coastline and Maridea report fresh capital, acquisitions and asset growth as advisor M&A keeps climbing
Carson Group's Dani Fava, Jason Pereira of Woodgate Financial, and Sally George of Convergency Partners led the raise as the growth-tech startup builds out its AI platform and leadership bench.
New teams from William Blair, Ameriprise and UBS bring more than $560 million in combined client assets to the firm's employee and independent channels.
Regulators this year approved UBS Bank USA’s conversion to a nationally chartered bank.
How a subprime lender’s car-loan bonds allegedly unraveled before bankruptcy.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
