Equity Strategy

A weekly detailed guide of our most commonly tracked data points and proprietary models. The publication covers our latest market timing indicators, a comprehensive array of valuation models and our latest sentiment indicators.

We have increased conviction in our moderate optimism for Brazilian equity. LatAm equity passed the recent stress test of yen unwind & US growth scare, with FX taking most of the hit. Brazil is cheap, a narrative of declining rates is likely, risk aversion is high, local positioning favorable.

Market sentiment has dropped significantly amid rising global volatility and lackluster macro prints this week. YTD Northbound flow approaches negative, first time in history. We remain relatively cautious given uncertain policy implementation and volatile global macro backdrop.

Technical indicators began pointing to a tactical EU equities recovery earlier this week, and fundamentals remain attractive. However, for growth scare fears to fade more substantively, the market will need evidence reconfirming the US soft landing whilst the data calendar is thin and potentially volatile this month. We decompose the sell-off and analyze what to buy into a bumpy recovery.

We address 6 key AI debates in Europe and highlight 15 standout European 'AI winners' to buy on the current dip. While we see scope for choppy markets near term and core AI beneficiaries were first to fall in the recent market sell-off, we also expect them to be first to recover on still attractive fundamentals.

2024 China Equity Strategy Mid-year Outlook: Seeking Certainty Amid Change (26 May 2024)

As macro volatility persists, we recommend to continue to favour Value and Quality exposure. August to date has seen a sell-off of expensive, highly volatile stocks, with Value benefiting. Growth continues to be challenged in generating alpha. Size continues to have a large-cap bias.

While LatAm would underperform in a US hard landing scenario, the region, and especially Brazil, could be outperforming in a soft landing as it paves the way for lower rates. Local equity ownership is at record lows, and neither corporate leverage nor external accounts appear reasons for concern.

The RBA held rates in August but with more hawkish commentary - concerned about the lack of disinflation and greater excess demand. The prospect of cuts this year was specifically flagged by the Governor as unlikely - we expect the RBA will remain on hold through to May next year.

A guiding principle at Morgan Stanley Research is to enhance your investment process by delivering unique insights that separate the signal from the noise. An intuitively designed and well-crafted chart can often accomplish this with exceptional clarity.