Macro Insight
The Markets – A Review
 
 

Macro Insight

The Markets – A Review

 
  • The S&P 500 reached new highs, fuelled by renewed U.S. tax reform discussions. Brent oil rose 8.9% during the month and the trade-weighted U.S. dollar (USD) rebounded, as markets start to price in more Federal Reserve (Fed) hikes (our Morgan Stanley economists expect three more hikes in 2018).1

  • German elections ended in a victory for Mrs. Merkel, but her CDU/CSU alliance lost seats, leaving her weaker. Meanwhile, anti-immigration populist party Alternative for Germany (AfD) won 12.6% and their first seats in the Bundestag. The most likely scenario is now a CDU, Free Democratic Party (FDP) and Green party coalition. In France, thousands marched against proposed labour reforms in a month where Macron made a high-profile speech calling for further European Union (EU) integration, including the appointment of a EU finance minister.2

  • Rating agency Moody’s downgraded the U.K. debt to Aa2 on grounds that the Brexit process could bring fiscal pressures, while the British pound surged versus the USD to $1.36 mid-month, its highest level since Brexit. August inflation was 2.9%, while average earnings increased only 2.1%, bringing pressure on the U.K. government to lift the 1% public sector salary increase cap.

  • European economic data continue to be robust, with eurozone PMI having just reached new cycle highs.

  • Earnings expectations for 2017 have stabilised, and the more important question for the rest of the year is whether or not earnings per share (EPS) momentum can last into 2018. Our Morgan Stanley strategists forecast 7% EPS growth for 2018: a stronger euro, fading commodity price rises and slower gross domestic product (GDP) growth will likely dampen earnings for next year compared to 2017.

 
Executive Director
 
 
Head of European Equity Team
 
 

1Morgan Stanley Research, September 2017.

2Morgan Stanley Research, September 2017.

IMPORTANT DISCLOSURES

This material is for Professional Client use only, except in the U.S. where the material is for public use.

The views and opinions are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

This material is a general communication which is not impartial and all information provided is for informational and educational purposes only and should not be deemed as a recommendation. The information herein does not contend to address the financial objectives, situation or specific needs of any individual investor.

Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. All investments involve risks, including the possible loss of principal.

Prior to making any investment decision, investors should carefully review the strategy's / product's relevant offering document. For the complete content and important disclosures, refer to the link above.

CRC 1918472 Exp. 10/31/18

Check the background of our firm and registered representatives on FINRA's BrokerCheck

It is important that users read the Terms of Use before proceeding as it explains certain legal and regulatory restrictions applicable to the dissemination of information pertaining to Morgan Stanley Investment Management's investment products.

The services described on this website may not be available in all jurisdictions or to all persons. For further details, please see our Terms of Use.

Not FDIC Insured—Offer No Bank Guarantee—May Lose Value
Not Insured By Any Federal Government Agency—Not A Deposit

Privacy & Cookies    •    Terms of Use

©  Morgan Stanley. All rights reserved.

Morgan Stanley Distribution, Inc. Member FINRA/SIPC.