1CROSS-ASSET PLAYBOOK | FEBRUARY 7, 2024M O R G A N S T A N L E Y R E S E A R C HCROSS-ASSET STRATEGYCross-Asset Playbook – February 2024Better Is the Enemy of GoodWelcome to the Good PlaceA US soft landing is still our base case, but recent data releases suggest GDP growth can surprise to the upside. While eurozone growth will be sluggish, and downside risks from a weak China recovery remain, the economy is good, which isn’t half bad.Better Though Is…Bad?But for markets that are pricing to perfection a mid-1990s Goldilocks policy pivot, hotter-than-expected macro may be too much to bear for rich valuations. Typically, data surprising to the upside close to an imminent Fed rate change has seen risk assets underperform.Strategy: OW Fixed Income, for Better or WorseWe maintain our fixed income > equities preference. Value continues to be hard to find in stocks, while high grade bonds offer good carry and good convexity; valuations are already cheap if growth heats up, and the asset class can outperform should macro cool significantly.Trade Themes: Play RV Rather than BetaLong India & Mexico equities versus MSCI EM. Decompression in credit.Our Multi-Asset Allocation RecommendationsSource: Morgan Stanley Research; Note: ‘vs Last’ refers to allocations published 12-Nov-23.M O R G A N S T A N L E Y R E S E A R C HGlobalMorgan Stanley & Co. LLCSerena TangStrategistserena.tang@morganstanley.com+1 212 761 3380Morgan Stanley & Co. International plc+Arif AhmedStrategistarif.ahmed@morganstanley.com+44 (0)207 425 1023Morgan Stanley India Company Private Limited+Soham SenStrategistsoham.sen1@morganstanley.com+91 22 6880-1207Morgan Stanley & Co. International plc+Erika Singh-CundyStrategistErika.Singh-Cundy@morganstanley.com+44 (0)207 425 0960Sign up here: If you didn’t receive this directly, but would like to, please click here.Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to FINRA restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.CROSS-ASSET STRATEGYFebruary 7, 2024 04:10 PM GMT2CROSS-ASSET PLAYBOOK | FEBRUARY 7, 2024M O R G A N S T A N L E Y R E S E A R C HStrategic AllocationRegional/Asset TiltKey Asset ViewsKey Forecasts (4Q 24)EQUITIESE/WRegion: Japan >> RoWUS Sector: DefensiveUS Style: Quality Growt...
