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Expect taper in the next couple of months: Morgan Stanley

A tapering in the U.S. Federal Reserve's massive stimulus is the right thing to do against the backdrop of a recovery economy and a scaling back of the stimulus program can be expected in the next couple of months, Morgan Stanley Chairman and CEO James Gorman told CNBC on Thursday.

"Every now and then, markets behave like schoolchildren. They overreact, they run around like crazy. We know we're going to have tapering, we know we are living in an artificial state of excess liquidity right now and it's happening because the economy is recovering," he said.

(Read more: Could Fed's Yellen sound like a hawk?)

James Gorman, chairman and chief executive officer of Morgan Stanley
Andrew Harrer | Bloomberg | Getty Images
James Gorman, chairman and chief executive officer of Morgan Stanley

"The best result is the economy is demonstrating it truly is recovering and tapering happens. It's a good outcome. If someone is surprised by this over the next couple of months and it will occur in the next couple of months, then shame on them. There's been plenty of warning here," Gorman added.

Speculation about when the Fed will start to unwind its $85 billion-a-month asset purchase program has dominated markets for months.

In September, the central bank took markets by surprise by not starting to taper its monetary stimulus and in October expectations for when the scaling back may begin were pushed back amid a partial government shutdown and political wrangling over the debt ceiling.

Gorman, in Singapore for Morgan Stanley's annual Asia-Pacific Summit, said that had it not been for the political turmoil, "we would have had tapering by now."

Morgan Stanley last month reported a 50 percent jump in third-quarter revenue, helping its adjust earnings beat analyst expectations, as higher income from equities sales and trade offset a drop in the bank's fixed-income business.

(Read more: Morgan Stanley earnings, revenue top expectations)

Trading activity in the bond market has slowed significantly in recent months on speculation about a tapering of the Federal Reserve's bond-buying program, hurting Wall Street banks.

Gorman said that Morgan Stanley was moving from a period of recovery to a period of performance.

"It's been five years since the crisis. Major strategic blocks have been done, we've re-balanced the firm in terms of wealth and asset management, shored up the capital base and liquidity and cut our leverage dramatically," he said.

Gorman said that as the global economy recovers, more companies were likely to list their shares. Last week, the shares of micro- blogging website Twitter soared in their first day of trading on the new York Stock Exchange.

(Read more: What to watch for in the Yellen hearing: El-Erian)

"The Twitter IPO is a great example of bringing innovative companies to investors. I don't tweet, I stay away from social media because I've found people have tried to mimic me," Gorman said.

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