Morgan Stanley Out With Biggest Bear-Shitting Note of All Time — Expects Markets/Economy to Clown Punch Lower

This is making rounds today. Frankly, I don’t even know what to think about it. Their case: GDP to plunge from 4% to 1% and earnings growth from +20% to +4%.

Holy shit.

And then this troll says EM is preferred. I heard this nonsense just before the 2008 market collapse — fuckheads thinking the US would drop but China rise. WRONG.

ZH has the full rundown. Here are some highlights.

Macro turning points: The world still faces slower growth, higher inflation and tighter policy. But 2019 should see a turning point in this narrative, specifically in US growth, inflation and policy relative to the rest of the world.
Market reversals: Turning point in macro coupled with extreme pricing means we expect: 1) US and European yields to converge. 2) USD to make a cyclical peak. 3) EM assets to outperform. 4) US equities and high yield to underperform. 5) Value to outperform growth.

Where we differ: We think our calls for USD weakness, UST outperformance, US equity underperformance, value > growth and EM vs. US credit are non-consensus, materially different from market pricing, or both.
Strategy implications: We remain neutral equities (+0%), underweight credit (-5%), neutral government bonds (+1%) and overweight cash (+4%). Within this defensive posture, we are taking larger relative positions, and adding to EM.
While the note is quite bearish on the US, where growth is seen slowing to an annualized rate of just 1% by the third quarter of 2019, it is also a glowing praise of stocks outside the U.S. which the bank expects to do better than their American peers.

In a nutshell the bank’s 2019 global macro outlook is that this will be a year in which EMs “retake the lead” as a result of:

Global growth slows towards trend
US/DMs slow
Fed pauses/dollar weakens
China easing works
Growth differentials move in EMs’ favour

One thing of note is Morgan’s belief the Fed will pause and cause the dollar to decline. This is nonsensical rubbish. The Fed will pause and markets will drop, if the economy slow. But the dollar will not drop. The dollar is a safe haven and will increase in value, providing global markets weaken. I know this is the opposite of what this fucker is saying but I really don’t know what the fuck he’s smoking. If US markets get smoked, EM will get smoked even more. Their economies are weak and fragile, just like this guy’s jaw.

Look at his absurd dollar forecast.