Morgan Stanley’s model shows assets across the world are the least correlated in almost a decade. (AP Photo/Mark Lennihan, File)
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HSBC Holdings PLC, Citigroup Inc. and Morgan Stanley see mounting evidence that global markets are in the last stage of their rallies before a downturn in the business cycle. Analysts at the Wall Street behemoths cite signals including the breakdown of long-standing relationships between stocks, bonds and commodities as well as investors ignoring valuation fundamentals and data. "Equities have become less correlated with FX, FX has become less correlated with rates, and everything has become less sensitive to oil," Andrew Sheets, Morgan Stanley's chief cross-asset strategist, wrote in a note published Tuesday.His bank's model shows assets across the world are the least correlated in almost a decade, even after U.S. stocks joined high-yield credit in a sell-off triggered this month by President Donald Trump's political standoff with North Korea and racial violence in Virginia.Citigroup analysts also say markets are on the cusp of entering a late-cycle peak before a recession that pushes stocks and bonds into a bear market.
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