Global Cross-Asset Strategy: Morgan Stanley Research: Key Forecasts

Research evidence excerpt

Global Cross-Asset Strategy: Morgan Stanley Research: Key Forecasts

Global Idea

May 18, 2026 08:20 PM GMTM

Morgan Stanley Research: Key Forecasts

Next 12-Months Outlook: Our High-Conviction Calls Next 12-Months Snapshot

Structural Strength vs Cyclical Weakness : The economic outlook remains constructive, though not as strong as we US data continue to benefit from a stable consumer and robust equipment

forecasted a few months ago. High energy prices will boost inflation and weigh on growth, but structural fundamentals were investment, reinforcing our view that real growth remains steady and consumption

robust before the conflict and—so far—remain so. The energy shock is still brief, at less than three months, but the longer dynamics are closely tied to inflation. We expect consumption to be soft as energy

it persists, the bigger the effects will be. In the US and Asia, the higher costs have been absorbed so far; our constructive weighs on disposable income but as that passes and tariff inflation passes, we see

consumption improving. At a global level, we have written about the risks to growth

outlook endures. Europe is more exposed, as a net energy importer and without fiscal stabilizers in place, the pass-through

and second order effects may transmit across PMIs. Euro area PMIs started to

to inflation will happen faster and the drag on growth will be great, but so far, we do not see it as recessionary.

show downside as services PMIs missed materially recently (while manufacturing

Constructive, Not Complacent: Uncertainties driven by the conflict in the Middle East drive a wider-than-average range of PMIs were stronger than expected). In Asia, 2Q growth momentum is holding up

return outcomes, but the micro and macro fundamentals are largely supportive.