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Morgan Stanley has outperformed most prediction markets during this turbulent year. Here’s what’s next.

Wall Street analysts are the guys who come to the airport with hours. Previews for the year come before Thanksgiving, so it shouldn’t come as too much of a surprise that Morgan Stanley released its half-year outlook just 11 days after May.

Not that anyone saw what 2022 had in store – the worst bond market performance in decades, a rise in commodity prices, a war in Ukraine – but Morgan Stanley’s outlook was closer to home than most, certainly better than the other Wall -Street Firms Morgan on his behalf. She started the year with faint mid to late cycle challenges, warning of high valuations, tighter monetary policy and higher inflation than most were used to. All of that sounds about right.

From the archive: Here’s what Wall Street analysts see for the US stock market in 2022

The bank is still banging on that drum. “With strong labor markets, tighter monetary policy, a flat curve and our analysts’ forecast of slower global growth with downward skewness, we believe the market remains ‘late cycle’, supporting slight overall positioning and a premium to portfolio defense / Diversification,” say the strategists around Andrew Sheets.

In practice, this means that Morgan Stanley expects the S&P 500 SPX to
+0.25%
falling further to 3,900 by Q2 2023, although more optimistic elsewhere. His main trading recommendation is long positions in Japanese equities, as the firm says recent currency weakness should boost earnings at Japanese companies.

The weakness in both the UK and Australian currencies and the rally in commodities also make them optimistic on UK and Australian equities. In the US, the company favors the defensive healthcare and utilities sectors. In commodities, Morgan Stanley favors oil over gold as it sees $130 a barrel Brent BRN00,
+3.48%
through the third quarter and aluminum versus copper.

Probably the most useful graphic the company provided was this cartoon:

The Buzz

US consumer price growth slowed to 0.3% in April, the Labor Department reported Wednesday, but core price growth accelerated to 0.6% faster than forecast. In the last 12 months, prices have increased by 8.3%.

Market Gains Flew Quickly, With Stock Futures ES00,
-0.63%

NQ00,
-1.09%
turn lower.

The yield of the 10-year Treasury TMUBMUSD10Y,
3.042%
rose to 3.04%.

European Central Bank President Christine Lagarde said she expected the central bank’s third-quarter asset purchase program to end “early” and that the first rate hike could come as soon as weeks later. The Governing Council meets on July 21.

Coinbase COIN,
-12.60%
Shares slipped 14% in premarket trading as the crypto trading app reported worse-than-expected earnings on declining volume. In the crypto sector, too, the so-called algorithmic stablecoin TerraUSD fell to as much as 30 cents on the dollar.

unity software U,
-4.47%
Stocks fell on weak guidance. The big earnings report of the day from Walt Disney DIS,
+0.65%,
comes after the close of trading.

swedish game SWMA,
+8.89%
recommended a $16 billion cash offer by Philip Morris International PM,
-0.99%.

top ticker

Here were the most active stock tickers as of 6am on MarketWatch.

ticker

security name

TSLA,
+1.64%

Tesla

GME,
-5.35%

GameStop

AMC,
-5.43%

AMC entertainment

NEVER,
-0.81%

no

COIN,
-12.60%

Coinbase Global

AAPL,
+1.61%

Apple

AMZN,
+0.06%

Amazon.com

NVDA,
+3.81%

NVIDIA

UPST,
-56.42%

Ordinary Holdings

BABA,
-0.32%

Alibaba

Random Reading

The “Wagatha Christie” feud – a dispute between the wives of two English footballers – gets his day in court.

This woman bought an asset with a compound annual growth rate of 8.85%. (It’s a 106-year-old who lives in a house that’s now worth £550,000.)

Expat New Yorkers drive up rents in Miami, Much to the chagrin of the locals.

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https://www.marketwatch.com/story/morgan-stanleys-done-better-than-most-forecasting-markets-during-this-turbulent-year-heres-what-it-says-is-coming-next-11652265963?rss=1&siteid=rss Morgan Stanley has outperformed most prediction markets during this turbulent year. Here’s what’s next.

Brian Lowry

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