Normally on our blog we do the research and the information we provide here is sort of put through our ‘filter system’. Today’s blog is differentonly in that rather than give our opinions or advice we’re going to give you the advice of Morgan Stanley’s Global Investment Committee (GIC). As one of the leaders globally in investing we figure that they have a few good ideas and were glad to be able to share them with you, our dear readers. Enjoy.
The way Morgan Stanley sees it the economies of many emerging markets are going to grow in response to any of the policy easing steps recently passed. This is good news for commodity demand in these emerging markets as economic activity in these areas is generally more resource intensive than in economies that are more developed. This, in their opinion, will in turn spur the demand for investment in gold due to concerns about future inflation and currency debasement.
An asset class that has undergone a re-rating over the last several years, emerging market bonds are one of the more attractive sectors in the bond industry. The reason is that there sovereign issuers have improved their underlying credit quality. Morgan Stanley is encouraging their investors to seek unhedged, local currency denominated bonds.
Dividend paying equities, as far as they are concerned, should continue being an attractive alternative for investors looking for income. As they have consistently raised their dividend payout over the last several years, they are advising large, blue-chip companies.
Corporate balance sheets have strengthened under recent persistence of low interest rates and a rise in stock values. This has made investment-grade corporate bonds more attractive with their combination of higher yields and high credit quality.This makes them even better, as far as Morgan Stanley is concerned, than a traditional safe investment like US Treasury bonds.
Underpinning the demand for tax exempt municipal bonds will be the return to a 39.6% US income tax rate. Morgan Stanley favors A rated or better bonds that are general obligation and/or essential service revenue bonds. BBB rated or better with 5 to 11 year maturities are what they recommend.
Offering the same tax benefits as a limited partnership structure but coupling it with the liquidity of publicly traded securities, Master Limited Partnerships are a Morgan Stanley recommendation. They also recommend MLPs that concentrate on natural resource industries like minerals extraction, natural gas and oil. The reason they are attractive to income seeking investors is that, more so than conventional equity investments, they typically offer much higher dividend yields.
With a much better footing than their developed market counterparts, emerging market (EM) economies are the place to invest, as far as Morgan Stanley is concerned. The way they see it, growth in these markets is going to accelerate due to the policy easing steps that have been taken as of late.
While we’re not sure if Morgan Stanley coined this term, ‘Global Gorillas’ are one of their recommendations. These are large domestic market companies with oversized exposure to emerging markets and Morgan Stanley expects them to account for 80% of growth this year globally. Their best bets; India, China and Brazil, where rapid consumer spending growth is likely to happen over the next several years.
The last recommendation from our pals at Morgan Stanley is simply this; water. If there ever was an example of supply and demand water is it and, as the supply dwindles and the demand rises, the investor who has water in his portfolio is going to do quite well. It’s a global problem with global investment ramifications and there will be many new companies popping up that are going to search for ways to increase water’s availability, opening up many investment opportunities.
And there you go, Morgan Stanley’s opinions about the coming investment opportunities this year and into the future. We found them quite interesting and we hope you did also. Please come back and join us again soon when we get back to our regularly scheduled, advice filled and valuable tip heavy blogs. See you then.