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Chart of the Day: the pros are also baffled by markets

Does anyone really know what to do in these markets?


by Chris Marshall on Oct 04, 2011 at 10:36

Does anyone really know what to do in these markets?

The chart below shows the responses Morgan Stanley received from a poll at a meeting of more than 200 of their institutional investors in London on Friday that asked 'What best describes your attitude to global stocks right now?'

If everyone agreed then it wouldn't really be a market. But still, the total lack of agreement doesn't inspire confidence.

There was, however, a greater consensus on which asset class will perform best over the next 12 months: equities, with a strongly preference for emerging markets and the US over Europe and Japan.

Here’s Morgan Stanley’s market view, as outlined by the bank's Graham Secker:

‘We believe the market has got a bit ahead of itself over the last week or so in terms of expectations for a credible solution to the euro-area debt crisis. As this optimism dissipates equities are likely to remain under pressure and we continue to caution against investors pre-emptively positioning for a positive outcome in this regard – in bear markets equities become less of a discounting mechanism and patience becomes a key virtue for investors.

'We also maintain our view that equity valuation and sentiment are likely to overshoot on the downside in this cycle given the higher-than-normal uncertainties that exist with regard to monetary and fiscal policy. At the sector level we remain overweight defensives (telecoms and healthcare) and underweight cyclicals (capital goods and  consumer discretionary) and financials (banks).’

6 comments so far. Why not have your say?

Anonymous 1 needed this 'off the record'

Oct 04, 2011 at 13:55

Excellent - makes good sense to me...... we need more updates like this....

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joe stalin

Oct 04, 2011 at 15:37

Goldman's have gone cautious on growth - so they are buying. Forget Morgan Stanley and follow the squid.

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William Bishop

Oct 04, 2011 at 15:56

Morgan Stanley at least got it right over the very short view. I don't quite see the case for Wall Street being in big trouble when recent economic releases have tended to, if anything, negate the case for the economy tipping back into recession. On that basis, that market seems more a victim of a worldwide "risk on, risk off" mentality than genuinely exposed to fallout from eurozone's congenital inability to "get ahead of the curve" in its policy deliberations, hence potentially a buy.

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Oct 04, 2011 at 17:40

There looks to be value out there to me at the moment. Consider this as an example (not necessarily an investment recommendation): a few months ago Xstrata were £15, 3 yrs ago they were £24, now they're £7.50, OK they may go a bit lower but if they're back at £24 in 3 years time will you care whether you paid £7.50 or £6.50 for them?

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kenneth douglas

Oct 05, 2011 at 12:49

Avert good point Day Trader. One we should all keep in mind

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ray isaac

Oct 05, 2011 at 13:37

difficult times, our portfolio of maxi Isas are split worldwide,all medium to high risk, great returns generally over last 3 years, however August and september has wiped out 15% off overall portfolio, sit tight,continue with monthly investment, and wait for market correlation to kick in hopefully by summer 2012

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