financetom
Economy
financetom
/
Economy
/
Stock moves suggest belief in 'no landing' economy, Morgan Stanley says
News World Market Environment Technology Personal Finance Politics Retail Business Economy Cryptocurrency Forex Stocks Market Commodities
Stock moves suggest belief in 'no landing' economy, Morgan Stanley says
Apr 8, 2024 10:09 AM

NEW YORK (Reuters) - Recent action in the U.S. stock market suggests investors are beginning to price in a "no landing" economic scenario that involves an expected pickup in growth, Morgan Stanley ( MS ) equity strategists said on Monday.

For months, investors have been bracing for a "soft landing" for the economy, which sees tepid growth alongside inflation falling from high levels.

"However, the macro data and equity market leadership have started to support the no landing outcome," Morgan Stanley ( MS ) strategists led by Michael Wilson said in a note.

Strong economic data and firmer-than-estimated inflation reports have also reduced expectations for Federal Reserve interest rate cuts. Traders in fed fund futures on Monday were betting on a total of 62 basis points of rate cuts this year, down from January estimates of 150 basis points.

Sectors often linked to economic growth, such as financials, energy and industrials, have all put up strong performances so far this year, topping the S&P 500's 9% rise in 2024, while materials -- another economically sensitive group -- has also performed well.

This strength contrasts with last year, when a narrow group of megacap tech and growth stocks accounted for the bulk of the index's gains.

"This broadening is being led by cyclical industries... which is supportive of the notion that the equity market is beginning to process a better growth environment," Morgan Stanley ( MS ) said in the note.

While cyclically sensitive stocks and sectors have started to outperform, quality remains a key attribute for the leaders, the Morgan Stanley ( MS ) strategists noted.

The emphasis on quality "makes sense in the context of what is still a later cycle rather than an early cycle reacceleration in growth," they said.

If the growth pickup was early cycle, there would be more persistent outperformance by small-cap stocks and lower quality cyclicals, Morgan Stanley ( MS ) said.

The small-cap Russell 2000 is up only 2.4% this year.

The direction of Treasury yields could also play a role in how economically sensitive parts of the market perform, Morgan Stanley ( MS ) said. The 10-year Treasury yield was last at 4.42%, above the 4.35% level at which Morgan Stanley ( MS ) previously said stocks could become more sensitive to yields.

While downside in yields could prompt rotation to a broader group of cyclicals, "a break higher in yields could take us back into a narrow market regime," the strategists said.

Comments
Welcome to financetom comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
Related Articles >
Thai PM orders study on impact of US trade policy on exports
Thai PM orders study on impact of US trade policy on exports
Feb 10, 2025
BANGKOK (Reuters) - Thailand's Prime Minister Paetongtarn Shinawatra has ordered a study on the potential impact of U.S. trade policy on Thai exports, an official said on Tuesday, underlining concerns that its trade surplus with Washington could become an issue.   Thailand had a surplus last year of $35.4 billion with the United States, according to the commerce ministry, which has...
Germany's trade surplus with US reaches new record
Germany's trade surplus with US reaches new record
Feb 11, 2025
BERLIN (Reuters) - Germany's trade surplus with the United States reached a record level, data from the statistics office showed, as countries wait to learn how U.S. President Donald Trump will impose tariffs on imported goods. Germany's trade surplus with the U.S. expanded to 70 billion euros ($72 billion) in 2024, well above the previous record of 63.3 billion euros...
Fed's Powell heads to Congress with good data in hand but rising uncertainty
Fed's Powell heads to Congress with good data in hand but rising uncertainty
Feb 11, 2025
WASHINGTON (Reuters) - Federal Reserve Chair Jerome Powell begins two days of hearings on Capitol Hill on Tuesday with the economy around full employment, inflation expected to ease, and intense uncertainty about how all that will hold up under Trump administration trade and other policies that are still unfolding. Since Powell last appeared before Congress for one of his two...
US Dollar Rises Early Tuesday Ahead of Powell Testimony
US Dollar Rises Early Tuesday Ahead of Powell Testimony
Feb 11, 2025
07:41 AM EST, 02/11/2025 (MT Newswires) -- The US dollar rose against its major trading partners early Tuesday, except for a decline versus the euro, as markets look ahead to testimony from Federal Reserve Chairman Jerome Powell at 10:00 am ET. Powell's prepared remarks will be followed by questions from Senate Banking Committee members. Powell is scheduled to appear before...
Copyright 2023-2026 - www.financetom.com All Rights Reserved