Risk assets seen entering ‘danger zone’ in next few months

The team suggested investors reduce exposure for the August-September “danger zone” when seasonality worsens for equities and credit, the US presidential election comes into focus and an “exceptional” period of positive economic surprises likely moderates. “Over the next two months, positive catalysts fade, seasonality gets worse and near-term risks emerge, ” they wrote

NEW YORK: Investors may be too complacent about upcoming risks to markets over the next couple of months, according to strategists from Morgan Stanley, RBC Capital Markets and Societe Generale SA.

As a run of positive catalysts comes to an end – including improved clarity from earnings season, a new European Union recovery fund and the possibility of further US fiscal stimulus – the favourable environment for risk assets is expected to change, Morgan Stanley strategists led by Andrew Sheets wrote in a note.