Morgan Stanley Says China Will Have Impact on US Stocks not Economy

Ruchir Sharma, head of emerging markets at Morgan Stanley, said Tuesday that the impact of China’s economic slowdown will be felt more in U.S. financial markets, rather than in the U.S. economy.
“I think the economic impact in the U.S. is likely to be much more limited than any other region in the world,” he told CNBC’s “Power Lunch.” “But I think the earnings impact might be much more than what people think.”

Sharma said that a stronger dollar will hit companies that export their goods— about one-third of U.S. stock market earnings come from international and emerging markets, he said.

But more alarming, said Sharma, are indications of an impending global recession—with the source in China. “I think we already have some signposts that the global economy is pretty much close to a recession and we are one shock away from the global economy entering its sixth global recession in postwar history.”

Sharma, who is also the author of “Breakout Nations,” recommended bright spots in Eastern Europe and South Asia as investment opportunities. He told investors to look for countries that will benefit from lower commodity prices over the next few years.


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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza