Bears are back as Morgan Stanley tips share slump

[abd]

The bears are out again at Morgan Stanley, predicting a 25 per cent fall in developed world stockmarkets this year. They’re just not sure whether the fall has already started or if there’s one more leg up before the dive.


The analysis is aimed more at US and European markets than Australia, given our hybrid developed world/China nature, but the investment bank’s strategy team reckons Asia is riding for a fall as well. And Australian market sentiment still takes its lead from Wall Street more often than not.


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[one]

I wasn't surprised to read that, I've spoken to a few financial planners over the last few months who have also been predicting a sizable drop sometime during 2010. Given that a few of these guys picked the last big decline in 2008, I tend to listen to what they say. I should point out that this is about four planners
out of the hundred plus that I spoke with last year!

I got back into growth assets around June last year and did really well with quite an aggressive asset allocation (heavy on emerging markets and listed property, with the rest in Aussie and global shares), but I'm probably within a month or so of starting to move back into defensive assets for a while.

It will be an interesting year!

[abd]

Sounds like it will be a last chance buy in to grab some cheap blue chip shares.

[one]

It won't be the "last chance", in 20 or 30 years I'm sure we'll go through the same thing again. Maybe sooner...

Cheap is a very subjective word when it comes to shares. Back in early to mid 2008 I spoke with quite a number of people who were piling into the market, who were telling me how "cheap" the banking shares were. There guys were pretty bright, one of them was a CEO of a reasonably large finance company himself. Well, they didn't turn out to be "cheap" at all, because as history shows they kept dropping for some time after that.

[interlinkdirectory]

There does look like a strong chance of a double dip.

Looking at the level of anaemia still being seen in the big economies growth figures, Germany for example has just posted a bad set for Q4 09' and the UK has barely limped out of recession with 0.01% growth for Q4 09', odds are a few of them could be going straight back into recession.

When you line that up with most stimulus packages coming to an end, combined with more jitters building in the credit markets, some Western indexes are starting to look over priced.

Stability does still look a long way off. Today's markets are certainly not for the feint hearted.