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Despite the potential for higher equity returns, particularly in emerging markets, Morgan Stanley said it was not too enthusiastic about equities in general.
The bank has maintained a "neutral" position on the asset class for 2019. The bank is also neutral on government bonds, underweighted on credit and overweighted on cash.
Morgan Stanley cited "three global headwinds" that "limit our enthusiasm for actions in general".
First, there are "downside" risks to global growth in 2019, the bank said. Second, the potential growth in corporate profits has weakened significantly globally, especially in China and Europe.
Finally, according to the report, companies could face the pressures of rising wages and financing costs, which would limit the growth of earnings per share.
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