The three global economic trends to watch

The annual Morgan Stanley forum on the global economy concentrated on three economic trends this year: liquidity, commodities and protectionism. Chief Economist Stephen Roach reports back.

MacroVision - our annual deep dive into the burning issues in the markets and the global economy - offered nothing but optimism for 2007. Risks were banished to the distant tails of the probability spectrum, with the all-powerful liquidity cycle expected to cushion all but the most wrenching of shocks. Sure, markets will correct from time to time, but the MacroVision crowd felt any such downdrafts should be ignored. Dips were thought to be buying opportunities - whether for commodities, equities, credit, or emerging markets. The endgame was nowhere in the realm of possibility. Out-of-consensus views were presented with low conviction. MacroVision 2007 focused on three topics - liquidity, commodities, and protectionism.

MacroVision is a unique two-step process. On the first day, we conduct a series of thematically-driven workshops for our worldwide team of economists and strategists. On the second day, we bring a broad cross-section of our clients into the debate - representing multiple constituencies from the institutional investor base (fixed income, equities, and currencies), corporates, government officials, and a scattering of overseas participants. We start out with a broader menu of content choices on the first day and then narrow the debate for the client sessions. The trick in our approach is what we call "macro triangulation" - the examination of each topic by 2-3 distinctly different groups of individuals. We have been conducting this exercise with our internal teams for over a dozen years, and this is the sixth year we have added the client piece to the equation. I know of nothing like it in our business. The magic of MacroVision comes alive in our synthesis sessions, where we compare and contrast the insights and market conclusions that arise from multiple groups probing the same issue or problem from very different angles.

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