A team of Morgan Stanley analysts and economists predict
the bull market could keep rallying for another five years and take the S&P
500 as high as 3000, about a 50% gain from current levels. That’s because the
current U.S. recovery–already more than five years old–could run much longer
due to a prolonged period of deleveraging in the U.S., coupled with an uneven
global recovery.
In a new report titled “2020 Vision: Long Live the
Expansion,” makes the case for why a recession is “far from imminent.” The
S&P 500 swung between small gains and losses on Tuesday, climbing to an
all-time intraday high of 2006.15. The index is up more than 8% this year and
has surged nearly 200% from the March 2009 bottom.
Here are the bullet points supporting Morgan Stanley’s
long-term view on markets and the economy:
The world economy is not in sync. Major regional economies
are at different points along the growth cycle. In general, DM is leading
while EM is lagging.
- Volatility in the US continues to trend lower,
which can extend the life of expansions.
- Deleveraging in the US is ongoing, albeit
largely complete, and balance sheet priorities have shifted.
- Interest payments on debt burdens are ultra-low,
and household debt dynamics suggest there exists a sizable cushion
protecting consumers in a rising interest rate environment.
- Capital spending and inventories do not look
stretched. Corporate management hubris and other corporate metrics of
overheating remain muted.
- Several broad economic indicators in the US have
only just reached “normal” expansionary levels and are far from looking
unsustainable.
A combination of low volatility, low interest rates and the
lack of excessive capital spending or corporate valuations gives Morgan Stanley
reason to believe that the current recovery still has room to run.
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