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Morgan Stanley issues ‘full house’ buy alert

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US investment bank Morgan Stanley has issued a “full house” buy alert for global stockmarkets for the first time since early 2009.

The Daily Telegraph reports that all five of the bank’s market-timing indicators are suggested that now is the time to buy, based on valuation, fundamentals, risk, capitulation and a combined market indicator.

Morgan Stanley is said to have called the top of the European equities market in June 2007 using the same market timing signals, which led to it issuing a “full house” sell alert.

Morgan Stanley chief European equity strategist Graham Secker says recent sell-offs have little to do with the underlying outlook for the global economy.

He says: “Equities remain very cheap relative to government bonds and there remains a lot of liquidity around that is looking for a home.”

He adds: “Our indicator is not the Holy Grail of investing. We think that on the balance of probabilities, the risk-reward ratio looks pretty good right now, but it is not a very good week-to-week timing signal.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Sentiment and market fundamentals are often at polar opposites, as suggested here. Whilst I’m not suggesting we all rush in, I had a long chat with a new client today who is getting twitchy about a pension transfer which is currently out of the market and expected to be invested in the coming days.

    His risk is broadly medium (though capacity to take risk is high), his portfolio will be diverse (both in asset classes and management approaches) and his time horizon is long.

    We had a long chat concerning timing and whether the transfer should instead be allowed to settle into cash so that ‘we’ can decide a good time to invest (!). I questioned how we would know that…. the point being that the losses have been made and whilst volatility is high, only with hindsight will we know whether it was a good time to invest.

    My advice was to let the proceeds invest as intended but that it was ultimately his call…. he agreed. But I wonder, if not being advised, what his action would have been.

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