Is the Stress Systemic or Idiosyncratic?

Sep 2018

September 2018

A key issue for investors to address is if the stresses which affected markets in August were predominantly idiosyncratic in nature or if there are more sinister systemic issues at work. If they are mainly idiosyncratic, they are unlikely to derail an otherwise positive global economic environment, supporting risky assets and leading to increased upward pressure on government bond yields. However, if they are indicative of broader underlying tensions in the global economy (excessive leverage, tight financial conditions, deteriorating emerging markets) then the outlook is likely to be a lot more challenging and many “cheap” assets may actually be a “value trap.”

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 general communication, which is not impartial, is for informational and educational purposes only, not a recommendation. Information does not address financial objectives, situation or specific needs of individual investors.

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.