According to strategists at Morgan Stanley, it’s best to avoid US stocks and bonds next year, as higher valuations and tighter monetary policy do not support a good investment scenario. Stating that real yields are firmly in the driver’s seat with the latest developments, strategists note that if inflation remains high and real yields are under pressure, the risks for gold shift to a bullish position in the short term. cryptocoin.com We have compiled Morgan Stanley’s 2022 market forecasts and gold expectations for our readers.
Investors better look to Europe and Japan for more profits, according to strategists
Thinking that 2022 is really about ‘mid-to-late’ challenges, Morgan Stanley’s strategists are predicting better growth against higher valuations, stray investor activity and higher inflation than most investors are used to for the 2022 outlook. In addition, strategists say they are seeing many issues that are well above expectations, including the S&P 500 reversal and the US 10-year yields. Strategists think it might be better for investors to look to Europe and Japan for more profits, referring to more patient and compliant central banks. Mike Wilson, head of US equity strategy at Morgan Stanley, comments in the note:
On the face of it, we think there are a few reasons to say that global equities’ placid trajectory over the past 18 months will become a little more volatile as earnings growth slows, bond yields rise, and companies continue to face the challenges of disrupted supply chains and rising input costs.
Morgan Stanley forecasts the S&P 500 to close next year at 4,400, 5% lower than current levels, while 10-year U.S. Treasury yields will hit 2.10% by the end of 2022 amid better growth prospects and rising real rates. will rise. At the time of writing, the 10-year yield was trading at 1.62%.
Morgan Stanley chooses oil over gold for 2022keeps on pushing
Morgan Stanley also expects recovery in economic growth and a more moderate inflation outlook for the US in 2022. The bank expects inflation to peak in the fourth quarter and then to moderate next year as supply chain bottlenecks ease and base effects are eliminated from the calculations. Strategists’ expectations are as follows:
For 2022, we think this ‘warmer and faster’ recovery continues, supported by strength in consumer spending and capital investment. We agree on 2022 growth in the US, Europe and China. Good growth and moderate inflation might look like another version of ‘Goldilocks’ and for some assets we think the background looks bona fide.
The Federal Reserve has already announced that it will begin cutting monthly asset purchases at a pace of $15 billion a month in November, citing further progress. Strategists at Morgan Stanley do not foresee a rate hike until 2023. Such a delay could trigger a drop in the US dollar in 2022. By contrast, the CME FedWatch Tool sees market prices as a 49% chance of a first rate hike in early June, when tapering is most likely to end.
Meanwhile, Morgan Stanley continues to prefer oil over gold in the commodity market, stating that precious metals may experience a challenging environment next year.
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