According to a recent report by Morgan Stanley, U.S. investors shouldn’t be fearful that economic weakness elsewhere in the world will drag the U.S. economy back into another recession.
Decoupling From Europe
Over the past three quarters, U.S. industrial production (IP) has risen year-over-year by 3.5 percent, 4.7 percent, and 4.9 percent respectively.
With IP growth in Europe, Asia, and Latin America lagging U.S. numbers, U.S. IP growth has shown a recent decoupling from the rest of the world.
So, how long can this decoupling last?
Morgan Stanley analysts point to several instances of this type of sustained decoupling in the past, including the long-term outperformance of the U.S. industrial sector versus Europe’s throughout the 1990s.
Where Will The Growth Come From?
While the tech boom of the 1990s is long gone, Morgan Stanley believes construction could be the catalyst for the U.S. industry going forward.
Analysts also believe the collapse of oil prices is no cause for concern.
Despite the fact that energy-related machinery accounts for about 10 percent of total U.S. business investment, Morgan Stanley’s Nigel Coe believes that “if recent dynamics in retail gasoline prices are sustained, this could release $60 billion of annualized consumer spending.”
Trading Ideas
Morgan Stanley’s preferred stocks are stocks with high U.S. exposure and low energy exposure.
Analysts are bullish on…
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