Morgan Stanley(US:MS)2025-10-21 01:52Summary of Morgan Stanley Global Macro Forum on US-China Trade Tensions Industry and Company Involvement - Industry: Global Trade and Macro Economics - Companies: Morgan Stanley and its affiliates Core Insights and Arguments - US-China Trade Dynamics: The long-term trend is towards de-risking and competitive confrontation, with expectations of a return to a 'narrow deal' rather than a complete decoupling [43][43][43] - Market Expectations: Current market-implied trough Fed funds rate suggests little probability of a recession, indicating a risk skew towards a more hawkish Federal Reserve path than the baseline [43][43][43] - Asia's Economic Outlook: Trade tensions have stalled exports in Asia post front-loading, with a high global dependence on rare exports from China posing risks of supply chain disruptions [25][27][29][31][43] - China's Trade Strategy: China's dependence on trade is expected to prevent aggressive actions that could negatively impact global trade [36][43][43] - Equity Strategy: Advising risk management and maintaining long thematic hedges, with concerns over a recent sharp valuation-driven rally in Asia/EM equities [43][43][43] Additional Important Points - Export Controls: The US has expanded export control measures affecting entities linked to China, which may prolong global dependence on Chinese rare earth processing [35][31][43] - Market Implied Rates: The market pricing indicates a potential further decline in the Fed funds rate, with expectations of a bear market for the USD as US rates fall [19][43][43] - Valuation Concerns: There are concerns about the sustainability of the recent rally in Asia/EM equities, suggesting a potential downside in the near term [43][43][43]