Morgan Stanley continues to believe what we are experiencing right now is a market correction, like 1998, rather than the beginning of a double dip.
From Morgan Stanley:
Our economists are confident that the global economy will not double-dip and we agree with them. In short, we think this is more like 1998 (when an EM-led sovereign debt crisis and LTCM-inspired financial crisis caused a huge growth scare) than 2008.
If Morgan Stanley is correct, we’re about ready for a major increase in stock prices. Check out their match up of the current moves in the FTSE with those in 1998.
But if that wasn’t enough, Morgan Stanley also point to UK gilt movements, or sovereign debt, as a source of positivity.
They do, however, limit this positivity with a bit of reality. Morgan Stanley acknowledges that a lot will have to change in the minds of investors for this sort of 1998 rebound to take shape.
For this call to be right, we obviously need the market to get more comfortable with the growth outlook, and we are cognisant that prior bull market corrections have tended to coincide quite closely with falls in economic lead indicators.
So don’t get too excited, yet.