As inflation in the US hits a 40-year high and geopolitical conflicts continue to affect global trade routes, Morgan Stanley analysts are still optimistic about the outlook for the US economy.
As inflation in the US hits a 40-year high and geopolitical conflicts continue to affect global trade routes, Morgan Stanley analysts are still optimistic about the outlook for the US economy. This year, the Dow Jones is down 5% so far, while the S&P 500 is down more than 6% and the NASDAQ index is down 12% as investors gauged various factors such as inflation, rate hikes by the US Fed and the geopolitical conflict between Russia and Ukraine. “While the Morgan Stanley Global Investment Office remains cautious in dealing with current market volatility and understands the complications that the war-induced commodity shock is bringing to the global economy, we are far from a US recession. said Lisa Shalett, Chief Investment Officer, Morgan Stanley Asset Management.
What should investors do?
“While we see reasons to be confident in US economic strength, the grim geopolitical and inflationary backdrop means stock and bond markets are likely to continue to see volatility, and passive index-level investing remains a challenge,” Shalett said. She advises investors to keep an eye on core inflation, excluding food and energy prices, as this will ultimately stimulate monetary policy and inflation expectations. As for stocks, the CIO says investors should be selective and look for quality names at reasonable prices. “Our focus remains on finance, energy, industrial, healthcare and consumer services,” she added.
US economy still strong
Lisa Shalett sheds light on the US economy and has listed three reasons why she is optimistic about it. The first of these is the seriousness of commodity prices. “Of all types of inflation, commodity-based increases are the most self-healing, and thus temporary,” she wrote. The CIO added that Morgan Stanley analysts have adjusted crude oil prices for headline inflation, showing that oil prices are below those seen in the 1970s and 1980s, in 2006, and as recently as 2012. “Comparable to real assets like gold and copper, Brent oil is still priced around the 25-year average,” she added.
The rise in energy prices is seen as a key factor that will hit US consumption by $200 billion for a year, or $1,600 per household. “That figure is remarkable, but it dwarfs the estimated US household excess savings of up to $2 trillion. Gasoline spending has fallen 60% as a share of consumer wallets over the past four decades, which should help mitigate the impact of higher prices,” said Lisa Shalett.
Furthermore, the US currently only imports 5% of total energy consumption. Morgan Stanley analysts believe that if the country can return to 2014 productivity while improving the productivity of the well, it could meaningfully offset the current situation. The US government has sanctioned Russia, which has forced many US allies to part with Russian oil while prices have skyrocketed.
This post Wall Street Stocks to Buy, Analysts Bet on Financials, Energy, Industrials was original published at “https://www.financialexpress.com/investing-abroad/featured-stories/us-shares-to-buy-economy-going-strong-inflation-recession-russia-ukraine-conflict-crude-oil-price/2466782/”