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Biggest risk to the economy: 'Fed raising rates too quickly,' says Morgan Stanley analyst

  • Morgan Stanley portfolio manager Andrew Slimmon says this week's testimony from Fed Chair Janet Yellen was "good news."
  • It's also good news for people looking to invest in emerging and international markets, says Shundrawn Thomas, head of funds at Northern Trust, who also appeared on the show.
  • "We've seen value in moving more international," he said.

The biggest economic risk going forward, as Andrew Slimmon sees it, is "the Fed raising rates too quickly because the economy accelerates."

Speaking Thursday on CNBC's "Power Lunch," Slimmon, a portfolio manager at Morgan Stanley, called this week's testimony from Federal Reserve Chair Janet Yellen "good news" because she emphasized a measured approach by the Fed.

That's also good news for people looking to invest in emerging and international markets, said Shundrawn Thomas, head of funds at Northern Trust, who also appeared on the show.

"We've seen value in moving more international," he said. "What you see is the political position is improved; you've seen the economic situation improving and, most importantly, earnings. You've seen a faster acceleration in earnings revisions, actually, in Europe than even in the U.S."

Thomas attributes that partly to a bounce back from last year's threat of a euro breakup.

"What you're seeing is less concern about that risk, and it's playing itself out across the board," he said.

Slimmon agreed Europe has investment potential going forward, but he also had a word of caution for investors.

"People are under-invested in Europe, we hear that all the time," he said. "The only issue is some of the big stocks that are big parts of the indices, they're actually not cyclical stocks."

The danger there, he said, is the non-cyclical stocks may not be as big a part of the recovery happening across the pond.

"Be careful what you own in Europe because if you're expecting this big recovery but then you just buy the index, you may not get it."

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