CNBC Stock Blog

Equities Trapped Between Liquidity and 'Weaker' Growth

The Federal Reserve renewed its pledge on Tuesday to keep the benchmark rates near zero for an "extended period." Greg Peters, global head of fixed income research at Morgan Stanley, said he currently finds equities trapped between liquidity and weak growth. He shared his market outlook.

The Growth & Liquidity Trap

“Just look at China as an example—in a stronger growth environment, markets will focus more and more on withdrawal of liquidity and that typically is not great for the equity markets,” Peters told CNBC.

“On the other side of the coin, which I don’t think is a 2010 story but more of a 2011 story, is growth rolling over.”

“So the way I see it, either way, the markets are bounded by the withdrawal of liquidity or weaker than anticipated growth,” he continued.

Peters added that he sees the Fed moving rates sooner than what markets are anticipating.

“We see policy rates moving at the second half of this year, which I don’t think is the consensus right now,” he said.

  • Watch Peters' Previous Appearance on CNBC (Feb. 11, 2010)

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No immediate information was available for Peters or his firm.