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Big Name Turns Seriously Pessimistic About Global Stocks

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Morgan Stanley has downgraded global equities from equal-weight to underweight on fears of slowing GDP growth around the world.

According to the bank, over the next 12 months, there is now just 1% average upside to Morgan Stanley's price targets for the S&P 500, MSCI Europe, MSCI EM, and Topix Japan will see the weakest returns in six years.

Chief cross-asset strategist Andrew Sheets said, "Over recent weeks, you've heard us discussing why we think investors should fade the optimism from the recent G20. Why we think bad data should be feared rather than cheered because it will bring more central bank easing. Why we think the market is too optimistic on 2019 earnings and is underestimating the pressure from inventories, labour costs and trade uncertainty."

"We think a repeated lesson for stocks over the last 30 years has been that when easier policy collides with weaker growth, the latter usually matters more for returns. Easing has worked best when accompanied by improving data," the global investment bank said in a note.

Sheets claim that second-quarter earnings could hurt investors, who remains overly confident in current 2019 projections.

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