Morgan Stanley(US:MS)2025-06-12 07:19Investment Rating - The report indicates a cautious outlook on global economic growth, with a focus on the impact of tariffs and inflationary pressures, suggesting a potential slowdown in investment opportunities [15][22][29]. Core Insights - The report highlights a significant global growth slowdown, particularly in the US, with GDP growth expected to decline from 2.5% in 2024 to 1.0% in 2025 and 2026, driven by tariff-induced inflation and restrictive immigration policies [16][22]. - In the Euro area, growth is projected to remain around 1.0%, with inflation expected to undershoot the ECB's target due to a decline in private consumption and exports [17][22]. - Japan's economy is expected to show resilience, but inflation is moderating as the yen appreciates, leading to a hold on policy rates by the BoJ [18][22]. - China is anticipated to experience the largest slowdown, with real growth in 2025 expected to be 0.5 percentage points lower than in 2024, influenced by modest fiscal expansion and tariff impacts [19][22]. - India is projected to be the fastest-growing economy, with growth supported by domestic demand and fiscal policy, despite external headwinds [19][22]. Summary by Sections US Economic Outlook - The US economy is expected to slow significantly, with core PCE inflation peaking at 4.5% in Q3 2025, while growth stalls by late 2025 [16][22]. - The Fed is anticipated to maintain its policy rate throughout 2025, with potential easing starting in March 2026 [16][22]. Euro Area Economic Outlook - Growth is forecasted to be below potential, with the ECB expected to cut rates to 1.5% by December 2025 due to weak economic activity [17][22]. Asia Economic Outlook - Tariff uncertainty is expected to weigh on growth in Asia, particularly affecting capital expenditures [24][25]. - China's GDP deflator is projected to remain negative, indicating ongoing deflationary pressures [56]. CEEMEA and LatAm Economic Outlook - The CEEMEA region may see growth acceleration despite global uncertainties, while Brazil and Argentina are expected to fare better than Mexico amid the global slowdown [21][26]. - Mexico is significantly impacted by elevated global uncertainty, while Chile and Colombia are affected to a lesser extent [26][22]. Global Strategy - The report emphasizes that US risky and risk-free assets are attractive compared to the rest of the world, with a recommendation to overweight US equities and core fixed income [29][22].