Morgan Stanley’s “Debt-Equity Clock” appears to be giving the time-to-buy-stocks-over-bonds signal, if we understand correctly.
While this might make sense going forward given where bonds are, aren’t they a bit late in the game here? Stocks already blew away bonds.
Pragmatic Capitalist: Interesting data out of Morgan Stanley recently. According to their “debt-equity” clock they say it’s time to prefer stocks over bonds. According to MS we are entering the recovery phase after having been in the repair phase of the cycle. During the repair phase balance sheets are tirelessly repaired by corporations, debt is paid down, costs are cut, cash is boosted and ultimately credit expands. MS believes the repair phase is just ending and we are moving into the recovery phase.
Yet the greater question is whether or not anyone actually follows this clock as a part of their decision making process. If only it were as simple as the clock makes it out to be. It’s hard to see if or where asset prices are even factored into the equation here.