Morgan Stanley indicator flips, investors should brace for market turmoil

Portfolio
Investors should brace for market turmoil over the next 12 months. That’s the warning from Morgan Stanley’s cross-assets team. In a note dated on Sunday, the bank advised market participants to go on the defensive, eschewing U.S. stocks for the safety of Treasurys and cash.
Morgan Stanley’s cross-assets team says their cyclical indicator has flipped to “downturn" from “expansion," a shift that has historically led to weaker returns for stocks and other risky assets, along with an elevated chance of a recession, Marketwatch reported.

With U.S. data still above-average but deteriorating, our cycle indicator has shifted out of ‘expansion’ to ‘downturn’ for the first time since 2007

, wrote Serena Tang, a cross-assets strategist, adding that its downturn phase indicates when the improvement in economic data has started to slow or weaken outright.

Morgan Stanley’s cyclical indicator aggregates economic and financial markets data, including the yield curve’s slope, consumer confidence and debt issuance. In particular, credit issuance, consumer confidence and manufacturing gauges have started to soften in recent months.

The good news is that investors still have some time before they start to undergo serious pain as lower returns come mostly at the back-end of the 12-month period following the entry into the ‘downturn’ phase.

Tang points out that Morgan Stanley’s cyclical indicator flashed a ‘downturn’ as early as November 2006, when U.S. equities were still on the rise before they embarked on their spectacular tumble as a financial crisis slammed the global economy.

Nevertheless, the gloomy backdrop for global trade along with elevated equity and corporate bond valuations means investors shouldn’t take any chances and start to cut down their holdings of risky assets now, said Tang.

' title='
 

More in Equity

otp bankfiók belső és külső képek, logó
July 02, 2025 08:17

The current economic environment in Hungary is not favourable - OTP CEO

OTP is producing solid results thanks to its international presence

June 26, 2025 13:58

MTel EGM decides to separate passive mobile infrastructure

As of 31 October

GettyImages-2212193411-bankjegy-gazdaság-készpénz-pénz-valuta
June 26, 2025 13:45

What? Does the average Hungarian household really have 13 million in savings?

It's worth taking a closer look to find the truth behind the figures

forint átlagkereset forintárfolyam-árfolyam-bankjegy-fizetőeszköz-gazdaság-jegybank-készpénz-pénz-valuta
June 23, 2025 08:46

Forint caught in a war zone - this week we find out which way is forward

It's going to be a busy week

dollar euro
June 17, 2025 08:40

Hungarian debt manager reports strong demand for foreign currency bonds

Pricing phase over, demand could be up to three times higher than expected

államadósság kezelő központ ákk
June 16, 2025 12:23

Hungary to issue new USD bonds today

Three series to be sold

LATEST NEWS

Detailed search