Morgan Stanley's buy the dip $KEYS stock. Read & decide.
The highly awaited inflation report, the Consumer price index (CPI) for November 2023 — was released on Tue, 12 Dec 2023. (see below)
Just as the FOMC set to convene for the last time in 2023.
US -- core CPI for November 2023
US’s November core CPI came in at 4.0% as core inflationary pressures remain more stubborn.
It is the same as (a) analysts’ forecasts and (b) October 2023 inflation rate.
This is the first time since March 2023 that core inflation did not fall but remained status quo.
Optimistically, inflation has cooled on an annual basis, US started 2023, with a core CPI of 5.6% (January).
This bolster investor hopes that the Federal Reserve will hold interest rates steady as it wraps up it FOMC meeting on Wed, 13 Dec 2023.
"With underlying inflation set to trend lower only gradually next year, we expect Fed officials to push back hard on market expectations that rate cuts could come as soon as spring 2024" said Michael Pearce, lead US economist at Oxford Economics.
Hike or do not hike?
FOMC policy making members
Although inflation remains above the Fed’s 2% target, investors are largely betting the Fed would not raise rates in December — especially after recent dovish rhetoric from Federal Reserve officials.
Click here ! to read the comments made by the Fed officials when they were socializing before the blackout period.
The Fed’s Economic Forecast - extract
The Fed's Economic Forecast dated September 2023
With Fed fund rate almost a “done” deal for December 2023, market now is expecting the central bank to begin cutting rates at its March 2024 FOMC meeting.
Their confidence is at 40% probability of a rate cut happening.
However, if we were to refer to the Fed’s Economic Forecast released in September 2023, the scheduled rate cut of 0.5% will happen in 2024. (see above)
Whether it will be:
a single quantum of -0.5% or two quantums of -0.25% is still unknown.
in Q1, Q2, Q3 or Q4 of 2024, is still an unknown.
Instead of second guessing what the Fed would or would not do, everyone should just wait and hear what Mr Powell has to say during the 2pm press conference.
We should focus our energies on how to react upon confirmation by the Fed that interest rate remains status quo for December 2023?
For that, I refer to $Morgan Stanley(MS)$ thoughts and recommendations. (see below)
Morgan Stanley has advised clients to get ahead of the next market cycle by buying shares of high-quality growth companies in Asia and emerging markets (EM).
On 11 Dec 2023, Morgan Stanley’s strategist Gilbert Wong said — "We believe the market is now in transition to a new cycle that would favor Growth over Value”. "Our suggested strategy is to buy the dip on Quality Growth stocks in Asia Pacific region excluding Japan, and EM."
MS’s 3 recommendations:
(1) $Keysight(KEYS)$.
This is a “Buy” for investors who want to benefit from the growth of:
5G.
Cloud computing.
Cybersecurity.
The stock has (a) a cheap valuation and (b) strong earnings. Morgan Stanley sees a 24% upside potential.
Keysight Technologies, Inc. provides (a) electronic design and (2) test solutions to:
Commercial communications,.
Networking.
Aerospace, defense and government.
Automotive, energy, semiconductor, electronic, and education industries.
The international company has presence in:
Americas.
Europe.
Asia Pacific.
It peaked on 27 Dec 2021 at $206.51 per share, during the Fed’s quantitative easing (QE) days.
It has since “eased” back a little.
Its earnings per share for the past few quarters have been consistently above forecasts. (see below)
(2) Hong Kong stocks.
A buy for investors who want to diversify their portfolio and take advantage of China's economic recovery and stable US-China relations.
Morgan Stanley says the correlation with the US market is low and the dip is an opportunity.
(3) Chinese stocks.
A cautious approach for investors who are concerned about:
The regulatory.
Capital outflows.
Morgan Stanley warns against buying the dip and says further policy easing is needed to boost sentiment.
My Viewpoints
When it comes to investing, I always try to keep an opened mind.
I am keen to learn from Wall Street veterans and see what other stocks they know and share.
Of the 3 recommendations, I am interested to find out 1 of 3 recommendations.
That is US stock - Keysight Techologies Inc.
I will be monitoring and observing it and its price movements.
Do you think you will want to find out more about Keysight Technologies?
Do you think you will want to take a dip in HK or Chinese shares; despite Morgan Stanley’s word of caution about Chinese stocks?
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