staff | January 9, 2013

The performance of U.S. markets will be tempered by a weak economy, lower personal incomes and the threat of a U.S. government debt downgrade, says David Darst, chief investment strategist for Morgan Stanley Wealth Management, which oversees $1.7 trillion US in assets.

For these reasons, the firm is calling for "mid to high single-digit returns" for U.S. markets this year, says Darst.

We are "not excessively bullish, nor excessively bearish," he tells BNN.

Darst says Morgan Stanley Wealth Management estimates that 2013 U.S. gross domestic product will be 1.4 percent, down from an "anemic" 2.1 percent in 2012.

He cites the payroll tax increase which was approved in the recent fiscal cliff deal as hurting GDP.

"For 77 percent of American households, this payroll tax will hurt them, so we expect that will knock the GDP by six-tenths of one percent," says Darst.

He says U.S. markets have gone up in the past few years because of economic stimulus, not job creation, and that jobs, average work week and wages need to grow.

The investment strategist also points to the need for the U.S., which has already exceeded its $16.4-trillion US debt limit and has avoided a technical default, to go through the same kind of structural reform that such countries as Canada, Australia, Israel, China and the U.K. have already gone through.

"We need structural reform then we'll have another 18-year bull market," says Darst.