Market Bulls From Morgan Stanley to Eaton Vance Find Their Voice
Few predict anything less than turbulence for global markets in the coming week. But those who think the worst has passed are finding their voice.
Commentators from Morgan Stanley to Eaton Vance are turning less gloomy. They’re encouraged by a combination of unprecedented government and central bank stimulus efforts, declining volatility and -- crucially -- signs that the coronavirus pandemic is peaking in parts of Europe.
“There is light at the end of the tunnel but it’s still a long tunnel,” Erik Nielsen, UniCredit SpA’s London-based chief economist, wrote in a note Sunday.
None of which means markets will gain much traction on Monday. The S&P 500 Index dropped 1.5% Friday, which is likely to put Asian markets on the back foot as the new week gets underway, while the dollar rose and U.S. 10-year Treasury yields slipped back below 0.6%. That came after data showed a plunge in U.S. hiring last month, underscoring the economic damage inflicted by the virus lockdowns. Middle East markets were mixed Sunday after Russia and Saudi Arabia delayed a meeting aimed at ending their oil-price war. In early Sydney trading Monday, major currencies were also mixed, with the euro gaining versus the dollar on signs of a possible respite in fatalities in some regions hit hard by the coronavirus.
Following are comments on what may be in store for markets:
Eric Stein, the Boston-based co-director of global fixed income at Eaton Vance:
- “Given the actions of the Fed and other major central banks, many but not all of those acute financial stresses are behind us”
- “However, we are not nearly out of the woods yet as investors, I think, have either moved or are transitioning to the start to focus on fundamentals”
- “The selloff broadly last week was more market pessimism about both the duration of the economic downturn and potential shallowness of the recovery than the issues in repo markets, dollar funding markets, and Treasury markets”
- “All eyes will clearly be on Covid-19 and the fallout each country is feeling as well as the” policy responses
Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, in New York:
- “With the forced liquidation of assets in the past month largely behind us, unprecedented and unbridled monetary and fiscal intervention led by the U.S., and the most attractive valuations we have seen since 2011, we stick to our recent view that the worst is behind us for this cyclical bear market that began two years ago, not last month”
- “Current levels in equity and credit markets should prove to be good entry points on a 6-12-month horizon. Bear markets end with recessions, they don’t begin with them, making the risk/reward more attractive today than it’s been in years”
Edward Bell, senior director for market economics at Emirates NBD PJSC in Dubai:
- “That oil prices could gain so much on Thursday and Friday and it not be the dominant driver for financial markets suggests that attention remains fixated on the economic damage being wrought by the coronavirus pandemic”
- President Donald Trump’s plan, “where he ‘hoped’ that Saudi Arabia and Russia would cut production by as much as 10 million barrels a day, may not even be large enough to offset the enormous build in inventories this quarter” resulting from a collapse in energy demand
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