< The 2016 All-Europe Research Team
Graham Secker & team
Morgan Stanley
First-place appearances: 14
Total appearances: 33
Team debut: 1992
Graham Secker, 42, shepherds his five-person Morgan Stanley squad up one notch to second place. The London-based researchers’ outlook for the year ahead is not, on balance, optimistic. “The big issue is the lack of earnings growth for European equities that we’ve seen in the last 12 months — but also in the last five years,” Secker explains. “When we look into 2016, the picture doesn’t really change very much.” Indeed, they don’t foresee double-digit upside for any asset class in any region of the world in 2016. However, the team leader notes, ”the biggest swing factor would be if we start to see a pickup in nominal growth rates, particularly in some of the emerging markets. If emerging markets start to show some signs of improvement, then you would get a feeling that the global economy’s on a slightly better footing.” To be sure, equities “still look extremely cheap” relative to every other asset class, and the European Central Bank is continuing to provide liquidity. However, Secker contends, these considerations “offset some other negative factors, but of themselves they’re not enough to drive the market up in isolation.” In this environment he and his colleagues prefer cyclicals — in part since the regional economy is growing relative to where it has been but also because “historically, cyclicals tend to do well when the [U.S. Federal Reserve] is beginning to raise interest rates,” he points out. They also recommend that investors favor banks, projecting that “a lot of drags to the sector over the last few months potentially may fade going forward.”
