Will the rally in US mkts continue? Morgan Stanley answers

Excerpts from Your World at 10 on CNBC-TV18 Watch the full show » ALSO READ See what other FIIs are saying about the markets See what other experts are saying about markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

Healthy earnings from the financial sector took the Dow past the 10,000 mark earlier this week -- the first ever in over a year. It's a level that was unthinkable at the depths of the financial crisis last September-October. So, is the US economy and markets completely out of the woods?

John Mack, Chairman and CEO of Morgan Stanley, says the US economy is getting better. "When we get through this year, we are going to be a stronger economy."

The US markets, he says, is making progress but at a very slow pace.

Here is a verbatim transcript of the exclusive interview with John Mack on CNBC-TV18. Also see the accompanying video.

Q: The Dow at 10,000 - your CEO survey here that just released - Jamie Dimon saying that 62% of you feel improving business conditions right now. Is the economy really doing that well or getting that much better?

A: It is getting better. I was with Alan Mulally of Ford the other day. It is really sparks. He does see some pick up - not a lot. Jeff Immelt of GE and I chatted - again there is some green shoots out there but not robust. So, clearly it is improving but one of the reasons people feel so good is because the capital market is an open again. A year ago at this time, it was difficult to raise money, to raise equity money or bond money, so people feel better. They know the world is not going to collapse but the real growth is overseas in emerging markets and here in the US, we're making progress but it is very slow.

Q: Last year at this time I guarantee nobody would have thought we'd be at 10,000 on the Dow. Do things get better from here or do we start to slowdown? Joseph Stiglitz told us yesterday from Columbia University - he sees another slowdown after the coffers had been replenished and the Fed starts to takeaway some of the stimulus.

A: Again, I think there are a couple of things that I am very optimistic about. Number one, if you go back to March of this year was probably in February the low point on the Dow and S&P. I think that was an overreaction - that was panic. People were blowing securities out and there has been some talk that we are going to go back to that level. I don't believe that. Now will there be a sell off? For sure there will be a sell off. But when we get through this year from now we are going to be a stronger economy. Clearly we have deficits that are going to cause a lot of problems - you need to focus on that and hopefully as this administration gets through some of their agenda items in healthcare as an example. We spend a lot more time on job creation - that's what we need to do. We need to create jobs.

Q: There are those who say that with the government having to step in as much as it has had to do last year and they go to extremes by saying may be capitalism is broken - what do you say?

A: I don't believe that it is broken. I don't believe it is dead. I believe it is very strong and I believe that we continue to focus on the negatives of capitalism.

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