Morgan Stanley Sees U.S. Equities Underperforming in 2020

The transcript discusses the outlook for US equities, predicting underperformance due to weak earnings trends, stretched valuations, and political uncertainty. It highlights the role of central bank policies and the need for fundamental growth drivers. The global market performance is compared, with Europe and Japan expected to outperform the US. The potential for European market outperformance is noted due to low valuations and high yields. The transcript also covers the credit market environment and the outlook for sovereign debt, particularly US Treasurys.

What are the main reasons for the expected underperformance of US equities next year?

• Strong earnings growth and low valuations

• Weaker earnings trends, stretched valuations, and political uncertainty

• High investor confidence and stable political environment

• Robust economic growth and favorable central bank policies

How does the central bank's 'lower for longer' policy impact equity markets?

• It ensures continuous policy easing

• It does not necessarily mean equities will be higher for longer

• It eliminates the need for fundamental growth drivers

• It guarantees higher equity prices indefinitely

Which markets are expected to outperform US equities according to the analysis?

• Both European and Japanese markets

• Only European markets

• Only emerging markets

• None, US equities will outperform all

What is the outlook for corporate credit in the current market environment?

• Corporate credit will benefit from early-cycle economic recovery

• Corporate credit spreads have remained unchanged and the environment is challenging

• Corporate credit is expected to perform exceptionally well

• Corporate credit spreads are expected to widen significantly

What is the expected performance of US sovereign debt in the first half of next year?

• Yields are expected to fall significantly

• Yields are expected to remain quite range bound

• Yields are expected to rise sharply

• Yields will be highly volatile