Morgan Stanley: Funds are rotating from tech stocks to cyclical stocks, S&P 500 is only 2% away from its previous high
- Morgan Stanley strategists stated that U.S. stocks could receive an additional boost from capital rotation into cyclical and economically sensitive sectors. These sectors lagged during the Iran war, as previous market gains were highly concentrated in high-growth technology stocks.
- The team led by Michael Wilson pointed out that reports of increased traffic through the Strait of Hormuz, as well as signs that the drag caused by interest rates, oil prices, and the U.S. dollar on the stock market may be easing, are likely to propel undervalued stocks to become market leaders. The S&P 500 Index is currently only about 2% away from its historical high.
- Wilson said that the recent pullback in U.S. stocks was mainly led by storage chip stocks due to weakening earnings momentum rather than deteriorating fundamentals. In a bull market driven by earnings growth, such corrections after a period of strong gains are common.
- Wilson also stated that the market may experience more volatility in the coming weeks, but his confidence in the current bull market remains intact.
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