Morgan Stanley Planning for 2019: Buy Emerging Markets

According to Morgan Stanley, the US economy will start to sink sharply from next year, and inflation in the world will increase, which will keep monetary tightening within limits. For investors, this is a signal to stay away from debt markets, cache and start looking for opportunities in EM markets.

"The bear market in the EM markets is almost over when compared with the one in the US, which is still going on as well as the debt markets, and will start for the US dollar." - Andrew Sheets, a Morgan Stanley strategist, mentioned. The value should be sought in share growth, and yield on government securities should be the same as in the Eurozone, while waiting for the default rate will burden BBB rated corporations with debt.

A slowdown in the United States and a possible break from the Fed, expected sometime in 2019, will give EM markets the chance to recover and take up after long-suffering under the strain of strong dollar and yields on state-valued papers. The MSCI Emerging Market Index is still worse than the index of more developed countries for most of 2018, but the trend is beginning to show signs of reversal.

As for the cash cow, which now has a return higher than the value of inflation in the US, if not so much in Europe and Japan, it is expected to increase its value and remain the King.

However, a pause from the Fed will not provide much relief for US stock markets. Rapid growth in the rate of inflation will limit banks' ability to maneuver quickly and easily.

Source: Bloomberg Finance L.P.

Graphs: Used with permission of Bloomberg Finance L.P.

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