Market Overview

Will The Rest Of The World Drag Down The U.S. Economy?

Share:
Will The Rest Of The World Drag Down The U.S. Economy?
Related ETN
A Concrete Play On Trump's Infrastructure Plan With This ETF
5 Biggest Price Target Changes For Wednesday
Related IR
Ingersoll-Rand Is Goldman's Top Value Idea For 2018
Benzinga's Top Upgrades, Downgrades For December 8, 2017

According to a recent report by Morgan Stanley, U.S. investors shouldn’t be fearful that economic weakness elsewhere in the world will drag the U.S. economy back into another recession.

Decoupling From Europe

Over the past three quarters, U.S. industrial production (IP) has risen year-over-year by 3.5 percent, 4.7 percent, and 4.9 percent respectively.

With IP growth in Europe, Asia, and Latin America lagging U.S. numbers, U.S. IP growth has shown a recent decoupling from the rest of the world.

So, how long can this decoupling last?

Related Link: Do Technicals Suggest Early Evidence Of A Bear Market?

Morgan Stanley analysts point to several instances of this type of sustained decoupling in the past, including the long-term outperformance of the U.S. industrial sector versus Europe’s throughout the 1990s.

Where Will The Growth Come From?

While the tech boom of the 1990s is long gone, Morgan Stanley believes construction could be the catalyst for the U.S. industry going forward.

Analysts also believe the collapse of oil prices is no cause for concern.

Despite the fact that energy-related machinery accounts for about 10 percent of total U.S. business investment, Morgan Stanley’s Nigel Coe believes that “if recent dynamics in retail gasoline prices are sustained, this could release $60 billion of annualized consumer spending.”

Trading Ideas

Morgan Stanley’s preferred stocks are stocks with high U.S. exposure and low energy exposure.

Analysts are bullish on Eaton Corporation PLC (NYSE: ETN), Ingersoll-Rand PLC (NYSE: IR), Tyco International PLC (NYSE: TYC), Lennox International Inc (NYSE: LII), Hubbell Inc (NYSE: HUBB) and W W Grainger Inc (NYSE: GWW).

Morgan Stanley is cautious on stocks with under-indexed U.S. exposure, including Illinois Tool Works Inc (NYSE: ITW) and 3M Co (NYSE: MMM).

Image credit: Woodley Wonder Works, Flickr

Latest Ratings for ETN

DateFirmActionFromTo
Nov 2017CitigroupMaintainsBuy
Nov 2017JefferiesMaintainsHold
Oct 2017Bank of AmericaDowngradesNeutralUnderperform

View More Analyst Ratings for ETN
View the Latest Analyst Ratings

Posted-In: US decoupling US economyAnalyst Color Long Ideas Short Ideas Analyst Ratings Trading Ideas Best of Benzinga

 

Related Articles (ETN + GWW)

View Comments and Join the Discussion!