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Stimulus Season is the title of the latest Global Emerging Market investor note from Morgan Stanley.You can already guess where they’re going with it: Risky assets are going higher thanks to the Fed, China, and the ECB (and we’d note that there’s scattered stimulus elsewhere in the world, including Korea).
A few key points include:
We maintain our tactical market directional stance of accumulate (buy on weakness) EM risk – which we have held since July. We are neutral EM rates (duration).
Risk events in September may yet keep markets volatile – providing the opportunity to buy on weakness.
In spite of weaker global growth conditions we think anticipation of policy action – via ECB, FOMC and now China – will continue to support risk market sentiment.
A favourable decision by the German constitutional court, coupled with anticipation of intervention/monetary stimulus (ECB and FOMC), is likely to serve as a catalyst for further risk market upside – particularly as positioning remains light.
China political transition – as soon as October – may usher in expectations of additional policy measures and reform.
This is definitely the theme of the moment, though it’s worth noting that ex-US, most data is still pretty bad.
There’s hardly anybody who wants to fight these trends. As we mentioned earlier, this is the most bullish we can recall analyst and investors simultaneously since the financial crisis ended.
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