Too Soon to be Bullish: Morgan Stanley

Morgan Stanley is not bearish on LatAm, but it says that bullishness would be premature. “I’d caution against chasing every possible sign of an upturn in either the real economy or the markets,” says Gray Newman, senior LatAm economist at Morgan Stanley. “There is simply too much that we do not yet know about the severity or the duration of the current downturn. Given the downside risks associated with being early in calling an upturn and the relatively modest costs of being late to the recovery, I would argue in favor of caution,” he adds. According to Newman, the downturn could test the region’s policy resolve and serve as the ultimate guide to whether the region is on the path to sustainable growth. His caution stems from “the asymmetry of risks in calling an inflection point,” and the economist notes that regional downturns tend to be sharp, rapid and unforgiving, while upturns are measured in years rather than months. “My best sense is that the turning point is a late 2009 event, but there is a great deal that we do not know about the severity and the duration of the current downturn,” says Newman.