Donnerstag, 13. Januar 2011

Morgan Stanley: Europe Economics

Morgan Stanley's European economists about the economic outlook for 2011 in Europe:

Growth will moderate due to decreasing fiscal stimulus or increasing fiscal tightening (peripheral Europe), but will broaden out in terms of shifting from inventory rebuilding to stronger domestic demand. Sadly, only few jobs will be generated.


Although budget deficits decrease, government debts are still on the increase; not only in the periphery!
As you can see, the debt situation is crying for a solution: Debt has exploded in the last four years. MS Analyst believe that the solution will be EU debt (where the Union is guaranteeing) instead of national debt. However, this systemic solution will likely see some political obstacles, particularly from the German electorate (but what is their alternative?).

Inflation and bond yields will rise over the course of the year.

The macro-economic view leads to the following investment strategy:
  • Equity: growth will drive Earnings. The preferred sectors are Materials, Insurance, Energy and Telecom.
  • Exchange rates: overweight US-Dollar and underweight Euro because of the stronger US economy


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