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Morgan Stanley thinks we might be looking at a replay of the 1998 currency crisis when equity prices were pummeled over the course of several  months as sovereign’s were in the spotlight:

“Looking to history for a guide.  The best comparison for 2010 may be 1998 – not 2008, as some investors fear.  Our European equity strategist Graham Secker has made this argument.  Like today, in 1998 there were sovereign debt concerns and a financial crisis.  This fostered a growth scare that contributed to 20% correction in the S&P 500 in three months, which then rebounded almost as quickly.  Since the April peak this year, the trends looks quite similar.  There is no guarantee that this will continue – for starters, it is difficult to know when the next secular headwind will blow because it is largely idiosyncratic political risk.  But it reminds us that there will likely be a point of inflection when the market rallies 10% or more and it may already be here.”

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