Morgan Stanley bales out

April 6, 2009

Say this for Morgan Stanley — it is not afraid to buck the trend. With world stocks up more than five percent in the few days that have been April trading and up 24 percent since hitting a low on March 9, the bank has decided bale out. In its latest strategy report, MS says it is moving 5 percent out of stocks to neutral. It likes cash.

This puts Morgan Stanley in the camp that sees the current stock rally as just part of a bear market. It says it is looking at fundamentals to get better before it will decide that trouble is past. 

“The three fundamentals we look at are : 1) earnings; 2) U.S. housing; and 3) banks’ balance sheets”,  it says.

Interestingly, MS also admits it could be wrong. For one thing, it could be baling out too early with the rally continuing for “positioning and ‘second derivative’ reasons.

More significantly: “If policy action is successful in reparing banks’ balance sheets and putting a floor under house prices, the next bull market may already have started”.

So back to you, again

(Reuters photo: Brendan McDermid)

One comment

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[…] of recent headlines shows that plenty are weighing in on the question. Morgan Stanley is boldly claiming, “Bear Market Is Not Over: Selling Today.” James Paulsen, chief investment strategist […]

Posted by Finding the Market Bottom | Messy Matters | Report as abusive

Yeah, why should they be afraid. The feds will use taxpayers money again if they fail … as it always goes too big to let it fail and all.

Posted by VN | Report as abusive