Morgan Stanley: Where can an investor "hide" from a rate hike in the US

While the US stock market is reacting to a possible rate hike, Morgan Stanley analysts suggest looking at European stocks in several sectors. In their opinion, in 2022 the Eurozone market has every chance to overtake the S&P 500 in terms of profitability.

Against the backdrop of record inflation in the US , the Fed's monetary policy may tighten even faster than the market expected. This is unnerving investors - players have started talking about the fact that US stocks are unlikely to show the same impressive returns as in 2020 and 2021. Against this backdrop, Morgan Stanley investment bank analysts offered a "safe haven" - European stocks. In their opinion, during 2022 they can show themselves better than American ones - even despite the next wave of the pandemic.

Eurozone advantages

The European market performed well in 2021, although it lagged behind the US, said Graham Secker, HEAD of European stock strategy at Morgan Stanley. This is largely due to the rise in capitalization of the largest US technology companies, which “pulled out” the entire S&P 500 index. This year, “bigtech” is unlikely to become a growth driver in the US stock market, and Europeans can show better dynamics, investment bank analysts say. Analysts cite the following arguments: 

The pandemic is no longer a threat to economic recovery . The next wave of covid caused by the omicron strain turned out to be not as serious for the eurozone economy as the market feared back in November-December 2021. Analysts admit that the business survey results in Germany in December were very disappointing, but, for example, in France and Italy, data on the PMI business activity index and consumer sentiment remain positive.