FAST FIVE: Morgan Stanley: This Is The Biggest Threat To The Red-Hot Global Recovery
Morgan Stanley: This Is The Biggest Threat To The Red-Hot Global Recovery By Chetan Ahya, Morgan Stanley's Chief Economist and Global Head of Economics A year ago, when the global economy was in the depths of the Great Covid-19 Recession, we argued for a V-shaped recovery and the return of inflation.
If so, global growth could slow as it did in 2012 when policy-makers withdrew fiscal and monetary policy support.
In the US, this translates to a growth environment where GDP will be 3pp above its pre-COVID-19 path by end-2022 and underlying core PCE inflation (adjusted for base effects) rises above 2%Y from March 2022.
Our chief cross-asset strategist Andrew Sheets sees higher inflation and richer valuations complicating the strong growth environment.
They are overweight sectors most levered to reflation on a longer-term view (financials, materials and industrials) while favoring reasonably priced growth (healthcare) over more expensive growth (technology).