As the U.S. stock markets stabilized Thursday and oil prices rose slightly, Morgan Stanley (MS) Chairman & CEO James Gorman spoke out about his outlook for the global economy and oil investing.
The U.S. economy is not “under fundamental stress,” he told CNBC’s “Squawk Box“ while attending the World Economic Forum in Davos.
“It’s not a perfect picture, and there is some excessive valuation in the markets… no question,” Gorman said. But the employment situation is “phenomenal,” he adds.
“My screen I have at my desk, there’s about 70 stocks that I follow, from energy, financials, consumer, housing, [and] media; every one of them is down precipitously in three weeks,” the executive stated. However, he does not clear reason for the mayhem.
“China is not having a hard-landing here. China is having a natural, mathematical slowdown given the size of the economy,” he explained.
As for plummeting oil prices, that’s been an “absolute shocker,” Gorman says.
Investors – “if they have the stomach over a two-year period” – could do well by going long on the commodity, he adds.
“Supply and demand eventually rebalance. We’ve seen this again and again and again,” explained Gorman. “The question is if you’ve got the stomach to live through this rebalance.”
The Morgan Stanley chief is looking for more interest rate hikes this year, based on positive economic data.
Earlier this week, the company reported fourth-quarter net income of $908 million, or $0.39 per share, up from a loss of $1.6 billion, or $0.91 per share, a year earlier. After accounting adjustments, earnings were $0.43 a share, beating estimates.
The wealth group had revenues of $3.75 billion, down from $3.80 billion in the year-ago period. Pretax net income, though, rose to $768 million in the most-recent quarter vs. $736 million in Q4’14; the pretax margin for Q4’15 was $20%.
For the full year, the group’s net revenues totaled $15.1 billion, up from $14.9 billion in 2014. Pretax profits for the year were $3.3 billion compared with $3.0 billion in the prior 12 months. The profit margin for all of 2015 was 22%.
Client assets were nearly $2 trillion, while fee based assets stood at $795 billion on Dec. 31 — an increase of 3% from Q3’15 and 1% from Q4’14.
The total number of advisors stands at 15,889, representing a 1% increase from the prior quarter and a 1% drop for the year-ago period.
Financial-advisor productivity, which measures advisors’ total yearly fees and commissions, was about $947,000 for 2015; it stood at $944,000 in 2014. Average client assets per rep was $125 million last year.