The Stone - Beck Group - Morgan Stanley Team - Pasadena, CA
Morgan Stanley
The Stone - Beck Group
at Morgan Stanley
Consulting Group
55 S. Lake Avenue Suite 700
Pasadena, CA 91101
tel: (818) 409-0755
toll-free: (800) 488-1240
fax: (818) 742-6271



The Global Investment Committee (GIC), which meets monthly to review the economic and political environment and asset allocation models for Morgan Stanley Wealth Management clients, also discusses favored long-term trends that it believes offer worthy investment opportunities. Listed below are the GIC’s favored themes and rationale for investing in them. To learn more about investment opportunities that track these themes, please contact us.



Continue to pursue Value Opportunities Within Financials
The global economic recovery has shifted from asynchronous yet steady, to reflationary. Such a pick-up in inflation expectations has helped steepen yield curves globally and the potential for a pendulum swing on industry regulation and capital requirements could provide more leeway for lending growth and shareholder-friendly actions like share repurchase. We prefer US capital market leaders but would overweight banks globally. While US commercial real estate/ REITs are mature and unattractive at this point in the cycle, we see opportunities in insurance companies as well as global real estate related securities. Preferreds, bank loans and/or subordinated debt of some of the larger US financial institutions are still overweight.
READ MORE >




Japanese Equities to Ride “Abenomics”
Japan continues to represent an emerging growth story. The reason: the confluence of monetary and fiscal stimulus with political and structural reform. The GIC favors broad market exposure now that the yen is re-priced. We recommend splitting between active and currency-hedged passive exposures. READ MORE >




Consider Getting more Aggressive about Cash Management
Over the past year the short end of the yield curve has steepened materially as both the Fed’s actions and their forward guidance has driven rates over 1% inside a 2-year maturity. We think fixed income investors could exploit this opportunity while potentially reducing volatility and exposure to rising rates by shortening duration and rolling up the curve with 1 month and 3 month CDs and t-bills. READ MORE >




Opportunities in Emerging Market Equities
EM currencies have re-priced and may no longer be vulnerable to FED hikes. Global reflation, improvement in trade and the potential for real yields to decline from here could set up a multi-year bull market.
READ MORE >




Focus on Momentum Strategies which are now Cheap
We are overweight momentum exposure, or equities that have outperformed over the last 6-12 months, which are currently priced at a discount to market valuations for the first time in our 30-year data history. During previous periods when momentum has been attractively valued, the stocks have a record of outperforming. Driving these valuations are an unusually high exposure to value sectors, including Financials, Materials, and Industrials, which complement traditional high-growth companies. We believe this constituency may also benefit from our view of continuing global reflation. READ MORE >




Manage Risk of Rising Rates and Spread Widening: Use Credit Long/Short and Structured Credit Funds
The GIC believes interest rate normalization will most likely be a slow and measured affair, but will provide a meaningful headwind for investors using bonds for principal preservation. In particular, as rates rise, the GIC expects prices of longer-duration bonds to fall. Target zero or very low bond duration and minimal equity beta. Particularly attractive opportunities are focused on CMBS and CLO credit niches. Market neutral total return strategies should benefit from the current active security selection environment that the GIC envisions in 2016—delivering total return with bond-like volatility. Recommended correlation range: 0.30 to 0.50 to S&P 500; volatility range: < 8%. READ MORE >




Manage Broad Global Volatility: Consider Global Macro and Managed Futures
The GIC believes market volatility, which is at multi-decade lows, will normalize, potentially increasing volatility by as much as 30% over the next three-to-five years across asset classes. Global slowdown fears could lead to additional volatility across developed and emerging markets. Balanced growth investors should focus on adding to global macro and managed futures strategies to mitigate this volatility. These strategies should deliver uncorrelated returns with normalization in the rates, currency and commodities markets, our most opportunistic trends. Recommended correlation range: < 0.50 to S&P 500; volatility range: < 12%. READ MORE >




Focus on Private Credit to Capture the Illiquidity Premium

Private credit markets continue to be impacted by a deleveraging banking system, financial austerity and limited non-bank sources of capital. The current supply/demand imbalance in private lending provides a reasonably rich illiquidity premium and presents attractive risk-adjusted investment opportunities for patient capital. Also, relative value credit hedge fund managers can take advantage of movements across yield curves and credit spreads based on the present macro picture and supply/demand dynamics.
READ MORE >








Risk Considerations

International investing entails greater risk, as well as greater potential rewards compared to US investing. These risks include political and economic uncertainties of foreign countries as well as the risk of currency fluctuations. These risks are magnified in countries with emerging markets, since these countries may have relatively unstable governments and less established markets and economies.

Alternative investments may be either traditional alternative investment vehicles, such as hedge funds, fund of hedge funds, private equity, private real estate and managed futures or, non-traditional products such as mutual funds and exchange-traded funds that also seek alternative-like exposure but have significant differences from traditional alternative investments. The risks of traditional alternative investments may include: can be highly illiquid, speculative and not suitable for all investors, loss of all or a substantial portion of the investment due to leveraging, short-selling, or other speculative practices, volatility of returns, restrictions on transferring interests in a fund, potential lack of diversification and resulting higher risk due to concentration of trading authority when a single advisor is utilized, absence of information regarding valuations and pricing, complex tax structures and delays in tax reporting, less regulation and higher fees than open-end mutual funds, and risks associated with the operations, personnel and processes of the manager. Non-traditional alternative strategy products may employ various investment strategies and techniques for both hedging and more speculative purposes such as short-selling, leverage, derivatives and options, which can increase volatility and the risk of investment loss.

Investing in commodities entails significant risks. Commodity prices may be affected by a variety of factors at any time, including but not limited to, (i) changes in supply and demand relationships, (ii) governmental programs and policies, (iii) national and international political and economic events, war and terrorist events, (iv) changes in interest and exchange rates, (v) trading activities in commodities and related contracts, (vi) pestilence, technological change and weather, and (vii) the price volatility of a commodity. In addition, the commodities markets are subject to temporary distortions or other disruptions due to various factors, including lack of liquidity, participation of speculators and government intervention.

The value of fixed income securities will fluctuate and, upon a sale, may be worth more or less than their original cost or maturity value. Bonds are subject to interest rate risk, call risk, reinvestment risk, liquidity risk, and credit risk of the issuer.

High yield bonds (bonds rated below investment grade) may have speculative characteristics and present significant risks beyond those of other securities, including greater credit risk, price volatility, and limited liquidity in the secondary market. High yield bonds should comprise only a limited portion of a balanced portfolio.

Duration, the most commonly used measure of bond risk, quantifies the effect of changes in interest rates on the price of a bond or bond portfolio. The longer the duration, the more sensitive the bond or portfolio would be to changes in interest rates.

Equity securities may fluctuate in response to news on companies, industries, market conditions and general economic environment.

Asset allocation and diversification do not assure a profit or protect against loss in declining financial markets.

Investing in currency involves additional special risks such as credit, interest rate fluctuations, derivative investment risk, and domestic and foreign inflation rates, which can be volatile and may be less liquid than other securities and more sensitive to the effect of varied economic conditions.

Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.

Investing in foreign emerging markets entails greater risks than those normally associated with domestic markets, such as political, currency, economic and market risks.

Principal is returned on a monthly basis over the life of a mortgage-backed security. Principal prepayment can significantly affect the monthly income stream and the maturity of any type of MBS, including standard MBS, CMOs and Lottery Bonds.

Disclosures

Morgan Stanley Wealth Management is the trade name of Morgan Stanley Smith Barney LLC, a registered broker-dealer in the United States. This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Past performance is not necessarily a guide to future performance.

The material has been prepared for informational purposes only and is not an offer or recommendation to buy, hold or sell or a solicitation of an offer to buy or sell any security, sector or other financial instrument, or to participate in any trading strategy. It has been prepared without regard to the individual financial circumstances and objectives of individual investors. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives.

This material is based on public information as of the specified date, and may be stale thereafter. We have no obligation to tell you when information herein may change. We and our third-party data providers make no representation or warranty with respect to the accuracy or completeness of this material. Past performance is no guarantee of future results.

This material should not be viewed as advice or recommendations with respect to asset allocation or any particular investment. This information is not intended to, and should not, form a primary basis for any investment decisions that you may make. Morgan Stanley Wealth Management is not acting as a fiduciary under either the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or under section 4975 of the Internal Revenue Code of 1986 as amended ("Code") in providing this material.

Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors do not provide legal or tax advice. Each client should always consult his/her personal tax and/or legal advisor for information concerning his/her individual situation and to learn about any potential tax or other implications that may result from acting on a particular recommendation.

The indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. 

The indices selected by Morgan Stanley Wealth Management to measure performance are representative of broad asset classes. Morgan Stanley Wealth Management retains the right to change representative indices at any time.

Certain securities referred to in this material may not have been registered under the U.S. Securities Act of 1933, as amended, and, if not, may not be offered or sold absent an exemption therefrom. Recipients are required to comply with any legal or contractual restrictions on their purchase, holding, sale, exercise of rights or performance of obligations under any securities/instruments transaction.

This material is disseminated in the United States of America by Morgan Stanley Smith Barney LLC.

This material, or any portion thereof, may not be reprinted, sold or redistributed without the written consent of Morgan Stanley Smith Barney LLC.

© 2015 Morgan Stanley Smith Barney LLC. Member SIPC.

Check the background of our Firm and Investment Professionals on FINRA's BrokerCheck.

This information, products and services described here are intended only for individuals residing in states where this Financial Advisor is properly registered as described in this site.
Morgan Stanley  reserves the right, to the extent permitted under applicable law, to retain and monitor all electronic communications. Morgan Stanley will not accept purchase or sale orders via any Internet site, social media site and/or its messaging systems. Morgan Stanley does not endorse and is not responsible and assumes no liability for content, products or services posted by third-parties on any Internet site, social media site and/or its messaging systems. All electronic communications are subject to terms available at the following link: http://www.morganstanley.com/disclaimers/mssbemail.html. Any profiles and associated content are for U.S. residents only
*References to length of service at Morgan Stanley include years at Morgan Stanley and predecessor firms.
Morgan Stanley Smith Barney LLC and its affiliates do not provide tax or legal advice. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.
The securities/instruments, investments and investment strategies discussed in this material may not be suitable for all investors. The appropriateness of a particular investment or investment strategy will depend on an investor's individual circumstances and objectives. The views and opinions expressed on this website do not necessarily reflect those of Morgan Stanley.
Morgan Stanley Smith Barney LLC is a registered Broker/Dealer, Member SIPC, and not a bank. Where appropriate, Morgan Stanley Smith Barney LLC has entered into arrangements with banks and other third parties to assist in offering certain banking related products and services.
Investment, insurance and annuity products offered through Morgan Stanley Smith Barney LLC are: NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED | NOT A BANK DEPOSIT | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Morgan Stanley Smith Barney LLC offers insurance products in conjunction with its licensed insurance agency affiliates.

Life insurance, disability income insurance, and long-term care insurance are offered through Morgan Stanley Smith Barney LLC's licensed insurance agency affiliates.
Awards Disclosures
pp:26708 mp: 2796