While markets should trend higher overall, a double-digit slump in 2022 for European stocks is likely, Morgan Stanley’s ($MS@US) chief European equity strategist Graham Secker said. “Equities have gone up for 18 months in a straight line with no correction of any meaningful magnitude. I don’t think this will carry on for another 12 months.” The warning adds to a series of cautious outlooks for 2022, following a climb that pushed equity markets in Europe and the U.S. to successive records after the pandemic-induced slump. Decelerating economic growth and the winding down of policy support mean European and global markets are expected to grind up rather than repeat this year’s rally. Risks in Europe include demand surprises to the downside, leading the economy toward a stagflationary environment that will put pressure on corporate margins, political risks, and the European Central Bank’s possible tapering. The most probable scenario, according to Secker, is a continuation of economic expansion for another 2 to 3 years, which will create a benign environment for corporate earnings, he said. Among European markets, he singles out opportunities in German stocks, which have been underperforming.
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