Despite rising concerns that U.S. assets may lose their edge to international markets, Morgan Stanley sees the recent sharp decline in the dollar as a potential lifeline for U.S. equities.
- "The weaker dollar should benefit large cap U.S. relative EPS revisions (particularly versus Europe and Japan)"
- "From a global standpoint, we recommend favoring U.S. over international equities."
Morgan Stanley expects the S&P 500 to trade between 5,000 and 5,500 until major catalysts — such as a U.S.-China tariff deal, interest rate cuts, lower bond yields, or improving earnings revisions — materialize.
MS recommends investors stay focused on quality U.S. large-cap stocks:
- "We remain in a late cycle backdrop where both quality and large cap relative outperformance should continue," he wrote.
- "uncertainty persists"
- "We do think it makes sense to pick spots in high quality cyclicals that have already discounted a material slowdown in both macro conditions and earnings."
