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Morgan Stanley: This is what a world without oil looks like

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A note from Morgan Stanley analysts led by Chief Cross-Asset Strategist Andrew Sheets demonstrates the degree to which the fortunes of the energy sector are currently driving stocks and bonds while emphasizing that the correlation is "overstated." Stripping out the impact of the energy sector reveals a far different picture for industrial production, corporate earnings, and inflation around the world. "Oil’s role in driving hour-by-hour market moves is overstated. But its place in the broader macro debate remains central," write the analysts. While earnings growth for the benchmark S&P 500-stock index is forecast to come in negative, year-over-year, and earnings growth for the MSCI Europe has been stagnant for an astonishing 48 months, the picture brightens considerably once energy is taken away. Excluding the sector, year-on-year earnings growth in both the U.S. and Europe reach 5 percent and 4 percent, respectively. (VIEW LINK)


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