The 6000-target for the ASX is “constructively cautious” and highly dependent on Australia being able to overcome the four “flashpoints”.
The deteriorating housing market is one of the key concerns cited by the broker, as a weaker housing market feeds into bank revenues and consumer spending.
RBA on hold
The same goes for gross domestic product growth, in that depressed housing activity weighs on consumption and construction.
Morgan Stanley is expecting Australian GDP growth to fall below trend in 2019 to 2.5 per cent. September quarter figures released today by the Australian Bureau of Statistics on Wednesday were well below market expectations.
An annual growth rate of 2.8 per cent was recorded, missing consensus forecasts for 3.3 per cent growth.
Morgan Stanley sees the Reserve Bank of Australia on hold for all of 2019, before targeting two rate hikes in the first quarter of 2020. Rates were kept on hold at 1.5 per cent at the final meeting of 2018 on Tuesday.
“The world still faces slower growth, higher inflation and tighter policy. But 2019 should see a turning point in this narrative, specifically in US growth, inflation and policy relative to the rest of the world,” the strategists said.