Morgan Stanley Updates Its Recession Playbook
As states across the nation are lifting pandemic restrictions, Morgan Stanley strategist recommends investors to try strategies that will help them make gains in the recovering economy, reported by Business Insider.
As now the market sees early states of recovery from the recession, Mike Wilson, the chief U.S. equity strategist at Morgan Stanley advises investors to follow the historical cyclical playbook for clients.
“If we take the historical cyclical playbook, our expected V-shaped recovery implies a sustained period of cyclical outperformance ahead,” Wilson said.
According to Wilson, inflation next year will be a sign of increase in demand for things that the pandemic put on hold, and higher spending will indicate improvement in overall gross domestic product. Therefore, consumer confidence will become stronger and lost incomes are recovering.
“Our review of history says that acceleration in key variables — inflation, consumer confidence, PMIs, and GDP growth — will be needed to sustain upside, and we think that the recovery from this recession and the associated policy response may bring that state of the world into being,” he said.
Wilson gave out three pieces of advice for investors to benefit from the current situation. Firstly, he recommends investors to upgrade industrial stocks and material stocks to overweight from equal weight. The Morgan Stanley strategist has his eyes on Textron, Raytheon Technologies for industrials, and LyondellBasell Industries, CF Industries Holdings, and Freeport-McMoRan for materials.
Secondly, he suggests investors upgrade consumer discretionary stocks to equal weight from underweight, as he picks Ford, General Motors, Under Armour and iRobot for this category.
Thirdly, he proposes downgrading consumer staples to underweight from overweight.