Morgan Stanley just revamped a 9-stock list that's beaten the S&P 500 by 18% over time. Here's what's on it — and how much further each one has to run.
Morgan Stanley cautions investors against assuming that markets have priced in the bottom.
Slowing demand means companies are rolling into an era of weak profitability. The firm's chief US equity strategist, Mike Wilson, compares the coming earnings recession to something that could be similar to what transpired in 2008 and 2009, when markets failed to price in the severity. The 10-year Treasury yield sit a few bases points off, and the S&P 500 and the next twelve months' EPS revisions were also similar relative to the peak. The equity valuations in 2008 were more than 20% lower than they are today.The lesson is that investors shouldn't assume the market prices in severe outcomes until it happens.
However, there are two contextual differentiators. In 2008, the central bank was slashing interest rates rather than raising them. Yet the firm doesn't believe the dip will be as catastrophic because the housing market and banking system aren't in the same kind of distress.
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