Morgan Stanley: Here Comes A Brutal 2010

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Morgan Stanley’s head of European research Teun Draaisma is out with a market outlook for 2010, and it’s not pretty.

After an easy 2009, characterised by a sharp rebound in expectations and a river of cheap money, 2010 will be a slog.

For one thing, you can expect tighter monetary policy in the very near future, along with other cycles that bode ill for stocks.

See how it’s going to go down here >>

After the bull comes a long slog

Source: Morgan Stanley: 'Strategy: Euroletter Tougher Times in 2010'

Check out what happened in Japan after the stimulus was withdrawn

Source: Morgan Stanley: 'Strategy: Euroletter Tougher Times in 2010'

The tightening is coming, so that means get into defensives

Source: Morgan Stanley: 'Strategy: Euroletter Tougher Times in 2010'

After banking crises, sovereign debt crises are next

Source: Morgan Stanley: 'Strategy: Euroletter Tougher Times in 2010'

When will tightening occur? When jobless claims hit the 350k-400k level

Source: Morgan Stanley: 'Strategy: Euroletter Tougher Times in 2010'

And guess what: GDP growth is often not conducive to stocks (because it accompanies monetary tightening)

Source: Morgan Stanley: 'Strategy: Euroletter Tougher Times in 2010'

Here's more evidence that stocks mainly do well when GDP growth is weak

Source: Morgan Stanley: 'Strategy: Euroletter Tougher Times in 2010'

EPS growth isn't conducive to strong market growth, either

Source: Morgan Stanley: 'Strategy: Euroletter Tougher Times in 2010'

In the meantime, government debt is soaring!

Source: Morgan Stanley: 'Strategy: Euroletter Tougher Times in 2010'

Not everyone feels this way

Not everyone thinks we're going to have a rebound coupled with tight money. See why Goldman thinks the recovery will remain particularly weak >>

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