Morgan Stanley: Four economic themes for 2011

Morgan Stanley identifies four economic themes for 2011 to be considered for investments:

1. Solid but unspectacular global growth
   Growth in developed market (DM) is elevated by cyclical forces (i.e. improving business cycal) against structural headwinds/problems. Early business cycle in DM and mid business cycle emerging markets (EM) have different problems, policies — a dynamic to watch
   
   
2. Global rebalancing and inflation
   Continued rebalancing (i.e. shift of growth) between EM and DM, and within countries, reinforces the growth outlook. But EM inflation risk is rising, potentially exacerbated by better DM growth; makes policy response difficult.
   
3. Sovereign risk 2.0
   The sovereign debt crisis has accelerated, but risks may be less systemic as Europe muddles throu. The key is credible plans on bailout support and restructuring mechanisms to stem contagion soon.
   
   
4. Politicization of economic decisions
   Politics is affecting decisions on the sovereign debt crisis, also raising tensions on foreign exchange (FX) and trade. Obviously, the risk of policy error is high when politics are involved.