bullsIn these volatile times when so many extraneous events -- the devastation in Japan, the unrest in the Arab world -- are causing edginess among investors, it's surprising that the capital markets aren't seized by more turbulent twists and turns. investors are truly worried, and unsurprisingly, they keep returning to the same skeptical refrain: How long could the stock market avoid a more serious disruption, a deeper pullback?

I will repeat what I wrote here on March 17, when the world seemed ready to fall apart: "This is no time to panic. It's a time for equanimity and a tempered analysis."

Thanks to several introspective, experienced market watchers, the global condition and forecasts of where the U.S. economy and the markets are headed are being laid out within a logical perspective. So what's an investor to do now? What's the update on the world economy and the stock market?

"The Japanese earthquake and tsunami, while a human tragedy, will not derail the global business or equity bull market," declared Jeff Applegate, chief investment officer at Morgan Stanley Smith Barney (MS). He and chief investment strategist David W. Darst wanted to convey in their latest Global Investment Committee report that the attractions of the world of investments haven't been diminished. They were clear and forthright about their continued bullish stance.

Despite the human tragedy in Japan and the ongoing turmoil in the Middle East and North Africa, the global economic recovery and the stock market's bull cycle, are intact, says Applegate. says Applegate.

Accordingly, he says, "we are overweight [in portfolio exposure] to equities, commodities, and REITS (real estate investment trusts), and underweight to cash and bonds." In global equities, "we continue to overweight emerging markets and commodity-sensitive Australian and Canadian markets."

Within the U.S. equities, "we have a tilt toward growth at the style level," and in global bonds, "we overweight corporate investment- grade and high-yield." However, we are underweighted in the developed-nations' sovereign and short-duration debt. And, finally, on inflation linked securities, "we are overweight" in those, says Applegate.

European Policies Head in the Wrong Direction

Portfolio strategists at Goldman Sachs (GS) haven't changed their positive outlook: They're staying with their earnings and price targets for the Standard & Poor's 500-stock index companies.

"While we extend our their deepest sympathies to those coping with the tragedies in Japan, we maintain our S&P 500 earnings per-share earnings estimates and price targets as S&P firms generate only 1% of aggregate sales from Japan," says Goldman strategist David J. Kostin.

Morgan Stanley's Applegate believes that U.S. monetary policy will likely remain highly stimulative, while European monetary policy may become tighter this spring -- a policy direction which he deems unwise. As a result, he expects U.S. GDP growth, which is currently expected to be above 3%, will be better than that of other developed economies, where growth is forecasts closer to 1%. On the other hand, Applegate notes that the growth rate in the emerging markets is expected to be triple that of the developed markets.

Morgan Stanley continues to expect subdued inflation in most of the developed nations. However, inflationary pressures in the emerging countries are likely to peak in the first half of 2011, they note.

Oil's Minor Volatility Is No Threat

With regard to the dollar, Applegate and his team of economists and strategists believes the currency's trade-weighted weakness is likely over.
Longer term, "we believe the major developed nation's currencies will depreciate relative to emerging markets' currencies, such as the Chinese yuan, the Brazilian real, and the Indian rupee," predicts Applegate.

The global oil situation is also not too worrisome, in the eyes of Morgan Stanley's strategists. True, the unsettled conditions in Libya and elsewhere in the Middle East have led to heightened volatility in crude oil prices, ranging between $85 and $105 per barrel in the past month. "But as long as this political turmoil doesn't spread to the Middle East-North Africa's primary oil-producing nations, and thus cause a sharp spike in oil prices, this fairly range-bound oil-price volatility should not pose any threat to global business-cycle expansion or, by extension, the global equity bull cycle," says Applegate.

Indeed, in its calculations for this year and next, Morgan Stanley has assumed oil prices will average $100 to $105 per barrel. Those forecasts are largely based on demand forecasts from the emerging countries, which Morgan Stanley predicts will grow in excess of 65%, both in 2011 and 2012.

Stay the Course, and Buy Now

In sum, the outlook for the stock market and the U.S. economy remains bullish, according to the economists and market strategists at Morgan Stanley Smith Barney and Goldman Sachs.

"In our judgment, recent developments do not warrant a significant change in investment strategy," says Applegate. "So we reaffirm our tactical preference for global equities over global bonds and cash, as the time horizon for our tactical views is about 12 months."

Over at Goldman Sachs, Kostin and his team note that "we expect the Japan earthquake will have limited impact on U.S., growth." Still, he cautions that a "disruption of more than a few weeks in the supply of key components, such as auto parts or semiconductors, could have a more meaningful negative effect on U.S. output, although once again this would be temporary."

In all, there are a lot of reasons why the bull cycle should remain intact, and as I said last week, the downdrafts that have resulted from the recent calamitous events should provide buying opportunities for stout-hearted long-term investors.

Increase your money and finance knowledge from home

Reading a Stock Quote

Learn to read the ingredients of a stock.

View Course »

Introduction to ETFs

The basics of Exchange Traded Funds and why ETFs are hot.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

Major Fraud Alert

The entire Federal Banking System under FirstGov has been "Consumed" and "Levied" by way of a Maryland State Circuit/District Court Ruled “Appropriation and Garnishment” of all Future Earnings prior to and after 2004 against Bank Of America by way of the F.D.I.C. Regulations Prohibiting failing Banks from Merging with other failing Banks between the Dates of 08/04/08 and 10/09/09.

Bank of America violated the 21st Century Act: Final Amendments to Regulation CC Section: http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040726/attachment.pdf

seeking reimbursement of Credit, Loan, and Finance Balances as a "Bank Entity" and not a "Nonbank Consumer" as specified on Pages 85 and 86.

The person they sued through a LLC. Debt Collection Company and Law Firm was the "World Fortune Owner" who "Counterclaimed" and won.

Now all Contracts of any Corporations (Including Employment) under the "Controlling Interest" of any Investment Bank Worldwide are "Null and Void", and are also under the stipulated Rules and Regulations of an "Closely-held S Corporation rendering all Employed under Legal Actions against “Domination”, and also means that "No Corporation can hold Shares" officially making every Stock Exchange on the Planet a "Ponzi Scheme" by default.

Businesses owned by the States (Public Corporations) are being sold Stock Shares by Corporations also under the Federal Banking System in this Worldwide "Ponzi Scheme". The World Fortune Company Merrick Inc. Sweden is dissolving Millions and Billions of Dollars from "All Levels of Government"in the U.S. of Financing based upon Years of "negligent inaction" involving this case.

The Federal Government has already been forced to discontinue supplying the Financing States use to pay their debts, Persons in Government Offices may want to begin to take their jobs more seriously, these are different times from 10 Years ago and you will not be accepted civil servants here just because you say you are here to do the right thing.

May 29 2011 at 12:28 AM Report abuse rate up rate down Reply

Twelve percent of our national GDP is Govt. debt. When the countries who purchased our treasury bonds, {debt}, want to cash those bonds in and we can't pay up, it will change our country forever. No more food stamps, welfare, social security, medicaid, all of these programs will no longer exsist. An economic meltdown will seem pleasant and not even God will be able to help. Our president has done nothing to the folks who broke the laws of this great nation and stole every dollar they could from hard working Americans, and still do. We are not in this mess by accident, the rules of sound lending have become a joke. Millions of people have lost thier home because of pure greed, a trait that even our own president seems to uphold. Bull market my eye.

March 24 2011 at 3:20 PM Report abuse rate up rate down Reply
2 replies to amani4000's comment

I agree with most of what you say, except it was the gop's 2002 banking legislation that allowed predatory lending and less govt oversite that led to problems. And the dems passed banking legislation to address this, but it was watered down by the gop and Michelle Bachmann wants to repeal the new banking legislation that protects consumers. And there have been people prosecuted from mortgage companies and they are in the process of prosecuting those on wall street.

March 24 2011 at 4:57 PM Report abuse +2 rate up rate down Reply

Also, when Bush and the gop took office in 2001 we had almost no national debt and by the time he left office had almost $11 trillion in debt. Bush also had more foreign debt than ALL previous presidents combined. I believe that as our manufacturing continues to grow (which it has for 19 months) those paychecks will come back into communities creating demand for goods and services which leads to more jobs, our tax base returns, the debt can be addressed more aggressively, and the value of our dollar will go back up.

March 24 2011 at 5:00 PM Report abuse +1 rate up rate down Reply

Wall Street doesn't give a damn about anything but their own country club atmosphere and the hell with the rest of the country. They have the government under their thumb and write 75% of all the bills that pass, so instead of complaining about whoever is President, why not bitch and moan about these thugs who give the mobsters a run for their money

March 24 2011 at 12:34 PM Report abuse +3 rate up rate down Reply
1 reply to terrymcc72's comment

The new banking legislation passed by the dems addressed the problems of the 2002 gop banking legislation - but was watered down by the gop in order for it to get passed. And Michelle Bachmann wants to repeal it. They also are cutting funding for the IRS because they were given the resources to go after offshore accounts in 2009 with over 14,000 coming forward before the October 2009 deadline. The gop only makes cuts where it is selfserving. The same with the southern gop states passing legislation for illegals but it exempts their garderners, housekeepers, and nannies. Go figure?

March 24 2011 at 3:03 PM Report abuse +1 rate up rate down Reply

GOD BLESS PRESIDENT OBAMA = courage, wisdom, decisiveness ! Obama will save this planet as he did this nation

March 24 2011 at 12:08 PM Report abuse rate up rate down Reply

God Bless President Obama , he has saved this nation from an economic meltdown.

March 24 2011 at 11:18 AM Report abuse +1 rate up rate down Reply

reply to simpsongrsm regarding President Obama being against business: He has worked with our manufacturing sector since day one and we have had 19 months of gains, as well as our exports are up by double digits - this all means jobs. And business can write off 100% in improvements made in THIS country. Better trade agreements, enforcing existing trade laws, and negotiating on behalf of american workers instead of corporations is working.

March 24 2011 at 10:29 AM Report abuse +2 rate up rate down Reply

reply to PeekachewsRevenj regarding nobody exposing to credit: The banks had to show more on their books to cover debt ratio and they have - now they will be lending again. This is good news.

March 24 2011 at 10:25 AM Report abuse +2 rate up rate down Reply

amarkdeer: Unemployment is not up. It has gone from 10 to 8.9. Our manufacturing and exports have had 19 months of gains which equals jobs. As those manufacturing paychecks come back into our communities it creates demand for goods and services which creates more jobs, our tax base returns, the natl debt can be addressed more aggressively, and our dollar value increases.

March 24 2011 at 10:22 AM Report abuse +3 rate up rate down Reply

The increase in stocks is indicative of foreign money looking for a safe haven. It isnt going to go away anytime soon. We are still the most stable economy and the safest to invest in. Perhaps the life raft thrown to wallstreet by this foreign money influx will help the american consumer continue to increase spending without the subsequent increase in consumer credit. That and the government not borrowing so much would end this downturn permanently.

March 24 2011 at 10:06 AM Report abuse +1 rate up rate down Reply

With everything thats going on in the world Japan is having a crisis, war in Iraq and Libya... Gas and oil prices are up, unemployment is up, food up must I go on... how can they say everything is good and strong... I think there full of BULL!!!!

March 24 2011 at 6:25 AM Report abuse +5 rate up rate down Reply