In addition, mike wilson investment director and chief equity strategist of the US firm, stresses that the investors “they will have to be more tactical” and they will need to pay more attention to “the economy, legislative and regulatory policy, corporate earnings and valuations”. “Since we are closer to the end of the cycle at this point, trends in these key variables may swing before the final path is clear. Though flexibility is always important to invest successfully now it’s critical“, Add.
In this sense, between the main forecasts of Morgan Stanley by 2023 is Fixed income performing well, with 10-year US Treasuries ending the year at 3.5%. Likewise, they also estimate a S&P 500 very volatile throughout the year, a dollar downa good performance of emerging markets or the better performance of oil against gold.
Fixed rent
Morgan Stanley bet on bonuseswhom he has described as the “big losers” of last year and the potential “big winners” of 2023. “This will be particularly true in the case of high-quality bonds, which have historically done well after the Federal Reserve (Fed) stops raising interest rates, even when followed by a recessionSheets explains.
“In the same way,” he adds, emerging market equities and debt“who were the first to perform badly in this economic cyclethey could be the first to recover in the nextas happened after the dotcom crash in the early 2000s and in 2009 after the financial crisis.
Morgan Stanley fixed income strategists see high single-digit returns through the end of 2023 on German bunds, Italian government bonds (BTPs) and European bonds investment-grade bonds, as well as investment-grade bonds, municipal bonds, mortgage-backed securities issued by government-sponsored agencies, and AAA-rated securities in the United States. In addition, forecast 10-year Treasuries to end 2023 at 3.5% compared to the maximum of 14 years of 4.22% registered last October.
However, they caution, investors should keep a close eye on quality. “High-yield US corporate bonds may look attractive, but it may not be worth taking the risk during a potentially lengthy default cycle,” they point out from Morgan Stanley. On the contrary, the securitized productsLike the Mortgage-backed securities, automobile-backed securities, and collateralized debt obligations may offer investment opportunities.
equities
Another of the forecasts of these strategists is that equities will experience continued volatility and they estimate that the S&P 500 ends the year around 3,900 points. “Consensus earnings estimates are simply too high, to the point where we believe companies will hoard labor and see operating margins squeezed in a very slow-growing economy,” Wilson says.
In this sense, explains the Morgan Stanley strategist, investors should consider the parts of the equity market with the highest profitability, such as consumer staples, the financial sector, healthcare and public services.
Likewise, the european equities could offer a “modest upside” with an expected total return of 6.3% in 2023. “The financial and energy sectors are more likely to perform well in this environment”stands out Graham Secker, Head of Equity Strategy in Europe and the UK.
emerging markets
Morgan Stanley points out that “the tide could be turning” in emerging markets despite the negative effect that China could have on the markets. “Valuations are clearly cheap, and the cyclical winds are shifting in favor of emerging markets as global inflation declines faster than expected, the Federal Reserve stops raising rates and the US dollar declines,” he notes. jonathan garnerChief Asia & Emerging Markets Equity Strategist, while stressing that they have recovered “before the United States” in recent business cycles.
Japan
Japan could be one of the great protagonists of the year due to a combination of “low valuations and idiosyncratic tailwinds”which would translate into 11% gains for the TOPIX index of the Tokyo Stock Exchange. “MSCI EM, an index of large- and mid-cap companies in 24 emerging markets, could post a return of 12% in 2023,” they add.
Raw Materials
Finally, Morgan Stanley also sees that The dollar reached its maximum in 2022 and will fall during this year. At the same time, oil will overtake gold and copperwith Brent crude ending the current 2023 at $110.
Source: Ambito
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