Despite the potential for higher returns in stocks, especially in emerging markets, Morgan Stanley said it is not overly excited about stocks overall.
The bank maintained a “neutral” stance on the asset class for 2019. The bank is also neutral on government bonds, underweight on credit and overweight on cash.
Morgan Stanley cited “three overarching headwinds” that are “limiting our enthusiasm for equities overall.”
First, there are “predominant” downside risks to global growth in 2019, the bank said. Secondly, potential growth in company earnings have weakened significantly globally, especially in China and Europe.
Finally, the report said, companies could face pressures from rising wages and financing costs, which would limit growth in their earnings-per-share.