Morgan Stanley indicator flips, investors should brace for market turmoil

Portfolio
Investors should brace for market turmoil over the next 12 months. That’s the warning from Morgan Stanley’s cross-assets team. In a note dated on Sunday, the bank advised market participants to go on the defensive, eschewing U.S. stocks for the safety of Treasurys and cash.
Morgan Stanley’s cross-assets team says their cyclical indicator has flipped to “downturn" from “expansion," a shift that has historically led to weaker returns for stocks and other risky assets, along with an elevated chance of a recession, Marketwatch reported.

With U.S. data still above-average but deteriorating, our cycle indicator has shifted out of ‘expansion’ to ‘downturn’ for the first time since 2007

, wrote Serena Tang, a cross-assets strategist, adding that its downturn phase indicates when the improvement in economic data has started to slow or weaken outright.

Morgan Stanley’s cyclical indicator aggregates economic and financial markets data, including the yield curve’s slope, consumer confidence and debt issuance. In particular, credit issuance, consumer confidence and manufacturing gauges have started to soften in recent months.

The good news is that investors still have some time before they start to undergo serious pain as lower returns come mostly at the back-end of the 12-month period following the entry into the ‘downturn’ phase.

Tang points out that Morgan Stanley’s cyclical indicator flashed a ‘downturn’ as early as November 2006, when U.S. equities were still on the rise before they embarked on their spectacular tumble as a financial crisis slammed the global economy.

Nevertheless, the gloomy backdrop for global trade along with elevated equity and corporate bond valuations means investors shouldn’t take any chances and start to cut down their holdings of risky assets now, said Tang.

' title='
 

More in Equity

parlament galamb budapest országház
July 15, 2025 12:30

Hungary divided in two, only a narrow group of people could really get rich

Dramatic ratios in wealth inequality

tőzsde-kriptovaluta-bitcoin-befektetés-short-squeeze
July 10, 2025 16:25

Crypto enthusiasts launch petition against new 'outrageous' Hungarian rules

They are speaking out against the "criminalisation" of cryptocurrency investments

Súlyos büntetéssel fenyegetik a Wizz Airt, indul az eljárás
July 10, 2025 08:52

Fitch Ratings downgrades Wizz Air

Due to weaker-than-expected annual performance and other factors

revolut shutter
July 08, 2025 10:25

Revolut freezes the sale of cryptocurrencies for its Hungarian customers

Neobank sends new information

GettyImages-2202706663
July 07, 2025 08:00

Revolut bans most cryptocurrency transactions for Hungarian customers with immediate effect

Recent legislative changes have led the operator to take action

otp bankfiók belső és külső képek, logó
July 02, 2025 08:17

The current economic environment in Hungary is not favourable - OTP CEO

OTP is producing solid results thanks to its international presence

LATEST NEWS

Detailed search