The economic shocks of 2018 – China and Europe – are now largely in the price, hence we raise mining to benchmark and have turned more positive on European cyclicals to now be benchmark, focusing on domestic plays (though we stay underweight of US cyclicals).
As global liquidity continued to pull back last year, almost every asset class around the world fell.
The question going forward is what the flow-through will be to growth and how policy makers will respond.
With almost no tightening priced in, any tightening would be faster than discounted, and even a pause would not provide much stimulation.
Markets are pricing earnings to grow at a moderate pace. We think these expectations are too optimistic, particularly in the U.S.
When the next downturn comes, it could be a real mess. Central banks have little room to ease and high levels of political conflict will make an effective policy response difficult.
This fifth edition of our primer for thematic investing highlights the prospects of eight themes that we believe offer structural 'GDP-plus' top-line growth. The macro cycle suggests that such growth remains a scarce commodity.
Quality and Momentum drive our theme and stock selection.
We believe robust growth with upside can be found in our tech- related themes.
Themes in focus are 'The Asian consumer', which we believe should prove relatively insulated from disruption caused by a 'multipolar' world.
We polled attendees at our Quant Conference and compared responses with those from 2017. Adoption of machine learning has increased and there is more optimism about passive investing, but quant headcount growth slowed. We polled the audience at our 6th Annual Morgan Stanley Quantitative Research and Investment Conference
2018 – Low Earnings Yield best; Low Volatility in emerging
December 2018 - Low Beta best; Low EBIT/EV in emerging
Incorporate the new sector definitions in crowding barometer
European style timing model prefers value and momentum, US prefers size
Retail sentiment and signs of herding reflected in mass media website in China
Are China's retail investors market movers or trend followers?