Morgan Stanley says that investors have to be careful about 2018. It is warning that 2018 will be a tricky year. The economy in the United States and in China is expected to decline. Inflation will rise around the world. Andrew Sheets of Morgan Stanley said that he expects the growth of the United States economy to slow down as the economy enters the inning of the economic cycle. In China, the economy is also expected to slow down because of uncertainty about economic policy.
So far this year, the economy in both the United States and in China has grown at a good rate. In the United States, the GDP grew by 3% in the last two quarters, and in China, the GDP grew by over 6%. Morgan Stanley is predicting that the growth rates in 2018 will be less than what they were in 2017.
The tricky part is the economy in India and Brazil. The economies in those countries are crucial for the overall global economy. However, the economy in India hit an all-time low. In addition, the economy in Brazil has been growing at an extremely low rate.
Inflation is also expected to rise. In the United States, core inflation is expected to rise by a few points. Core inflation does not include food and energy. In China, overall inflation is expected to rise as well.
Monetary policy around the world is also expected to get tighter. Governments and central banks are expected to slow down their programs and not make as many interest hikes. Morgan Stanley is advising investors to stay safe by selling United States corporate bonds and buying European ones instead. The European market is more reliable and less volatile.