SMM News: on the 8th, Beijing time, Morgan Stanley (44.21,0.22,0.50%) cut its global equity allocation to its lowest level in five years, and cut its investment advice to reduce its holdings, saying the stock market outlook for the next three months looks particularly bad.
Profit forecasts remain overly optimistic, given deteriorating indicators of manufacturing health around the world, Andrew Sheets and other strategists wrote in a report on Sunday. They said expectations of a central bank easing were high and that already high share prices had little room to boost.
"We think the market's hint of low bond yields-a deterioration in the growth outlook-is too optimistic," they wrote. "the continued deterioration of global PMI indicates that there are significant downside risks to the macro environment."
Global stock markets have risen 16 per cent this year, and some strategists have taken a more cautious stance amid lingering concerns about the fragile global economy. Bond yields in many parts of the world have hit multi-year lows in recent weeks, underscoring the resilience of demand for safe havens.
According to the report, these Morgan Stanley strategists are more bullish on Japanese and European stocks than stocks in the United States and developing countries. They have increased their allocation of Japanese and emerging market government bonds.
"emerging market fixed income products will not be immune to sharp falls in the stock market, but we think they will perform better," they wrote. "Japanese government bonds lag behind the decline in yields in core European countries and look attractive on the basis of currency hedges."
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