Latest news with #Shalett
Business Insider
5 days ago
- Business
- Business Insider
Trump's tariffs and the tax bill are splitting the stock market. Here's the playbook for investors, according to Morgan Stanley.
President Donald Trump's policies are splitting the market into distinct camps, Morgan Stanley says. Lisa Shalett, the chief investment officer of the bank's wealth management arm, pointed to the effects of Trump's tax bill and his sweeping tariffs in a recent podcast. "Now, as the impacts of the tax reform bill and global tariff implementation begin to roll through the economy, we sense that yet another series of great divides are opening up," Shalett said. Here are the splits that are emerging: 1. Consumer-facing businesses vs. B2B businesses Businesses that sell directly to consumers are more impacted by any potential weakening fo household balance sheets, a risk that business-to-business firms are less worried about. Market pros believe that tariffs could weaken consumers' spending power, as companie can pass along the cost of import duties by raising prices. Shalett added that those pressures are coming at an already critical time for consumers, pointing out that more Americans are falling behind on credit card and auto loan payments. The job market is also flashing signs of weakness, with payrolls in May and June seeing a large downward revision, while job growth for the month of July was below expectations. A weaker labor market often leads to a pullback in consumer spending. 2. Multinational exporters vs. importers Multinational exporters outside of the consumer space are facing "fewer external barriers" to sending products abroad, Shalett said, suggesting they were more shielded from the trade war. Those firms are also benefitting from a weaker US dollar, which is making their products more attractive to foreign customers, Shalett added. Multinational firms are also typically more capital- and research & development-intensive, she said. That also positions them to benefit more from the tax benefits outlined in the " One Big Beautiful Bill," which creates favorable tax treatment for domestic R&D costs. "So, with this new structural division emerging, global stock selection is more important now than ever," Shalett said. Here are some characteristics of the companies investors should be leaning toward, in Shalett's view: Multinational non-consumer exporters. Tailwinds for these companies should continue, Shalett said. Select tech, financials, industrials, energy, and healthcare stocks. Stocks in these areas could benefit from some of the policies included in Trump's tax bill, which could lead to upside surprises in earnings and cash flow. Stocks that aren't "overhyped." International stocks, commodities, and energy infrastructure. Companies in these areas could help an investor diversify their portfolio, she added. Sentiment has shifted slightly more bearish in the last week, with Trump doubling down on tariff threats and markets digesting weaker-than-expected economic data. Goldman Sachs, Evercore ISI, Stifel, Pimco, and HSBC are among the firms that have recently flagged the risk of a stock correction or advised investors to rethink their portfolio allocations.
Yahoo
30-07-2025
- Business
- Yahoo
Where Morgan Stanley is looking for value after powerful rebound in U.S. stocks
The U.S. stock market mostly added to its big rebound from its April low after President Donald Trump announced on Sunday a trade deal with the European Union, amid worries over rich valuations. Investors have been rotating into cyclical stocks from defensive equities amid signs of a resilient economy and confidence in corporate earnings, Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, said in a note Monday. The rotation was partly amplified by optimism over the One Big Beautiful Bill Act suggesting 'a capex boom and cyclical recovery in the second half of 2025 through 2026, potentially further fueled by Federal Reserve rate cuts,' according to her note. Social Security wants to make a change that would cause 3.4 million more people to have to visit its field offices We're in our 70s with a $260K mortgage at 3% interest and $1.6 million in savings. Should we pay off our house in full? Why the man behind 'The Hater's Guide to the AI Bubble' thinks Wall Street's hottest trade will go bust The most important woman in bonds says investors now have unrealistic expectations The stock market has rebounded from the early April selloff sparked by Trump's announcement of 'liberation day' tariffs. The market recovered after the White House paused the tariffs and investors perceived positive developments as the U.S. worked on trade deals. The S&P 500 SPX closed at a record high each day of last week, ahead of Trump's meeting Sunday with European Commission President Ursula von der Leyen in Scotland on trade. They reached an agreement under which the European Union will pay 15% tariffs for most goods imported to the U.S. That followed other trade deals announced last week, including with Japan. Read: S&P 500 scores 5th straight record high ahead of Europe-U.S. trade meeting 'The equity market's powerful recovery from the tariff uncertainty bear market has been driven by multiple factors—technical, positional and fundamental,' Shalett said. 'Oversold conditions and derisking set the stage for a strong pivot back to equities once the 90-day reciprocal tariff pause was announced, while economic resilience supported earnings confidence.' With the S&P 500 again approaching historically high valuations, Morgan Stanley Wealth Management sees investment opportunities in the healthcare sector amid the recent rotation into cyclical stocks, according to Shalett. 'Health care—namely, medical equipment, devices and supplies, and distribution logistics —remains one of our favored fishing ponds for value,' she said. Healthcare XX:SP500.35 has been the worst-performing S&P 500 sector in 2025, according to a Bespoke Investment Group note emailed Monday ahead of the U.S. stock market's opening bell. Consumer discretionary XX:SP500.25 was the only other sector in the red year to date, while six of the S&P 500 index's 11 sectors were beating the index, the Bespoke chart above shows. 'Yes, technology is one of the sectors that's ahead of the S&P 500, but other non-tech sectors like industrials, utilities, financials, and materials have also outperformed' this year, Bespoke said in the note. The S&P 500, which has an outsize weight to Big Tech stocks, has climbed 8.6% in 2025 through Monday. In a sign that this year's rally hasn't been just about Big Tech, shares of the Invesco S&P 500 Equal Weight ETF RSP, an exchange-traded fund that equally weights stocks in the index, has risen 6.5% this year over the same stretch, FactSet data show. Meanwhile, U.S. businesses have been reporting this month their latest quarterly earnings, with results from Big Tech companies Meta Platforms Inc. META, Microsoft Corp. MSFT, Inc. AMZN and Apple Inc. AAPL scheduled for this week, according to the Bespoke note. 'We hope you had a restful weekend, because the last four days of July and the first trading day of August are going to be jam-packed with earnings and economic data,' Bespoke said. The Federal Reserve will wrap up its two-day meeting on monetary policy on Wednesday with a decision on where it's setting interest rates. The U.S. jobs report for July will be released Friday, while data on manufacturing and consumer sentiment will be released that same day. More imminently, Tuesday's U.S. economic calendar includes fresh reports on areas such as job openings and consumer confidence. The U.S. stock market closed mostly higher Monday, with the S&P 500 eking out a gain of less than 0.1% to notch a sixth straight record peak. The tech-heavy Nasdaq Composite COMP rose 0.3% to book a fresh all-time closing high, while the Dow Jones Industrial Average DJIA slipped 0.1%. The S&P 500 ended Monday up 28.2% from its April 8 low, according to Dow Jones Market Data. 'The stock market's stunning rebound and resilience have again emboldened equity investors,' said Shalett, who pointed to their optimism about 'Goldilocks' economic conditions. But she cautioned against 'buying the market' through the passive S&P 500 index, saying 'complacency is elevated, and valuations are rich.' Shalett said to consider stocks with 'earnings and cash-flow upside-surprise potential,' which may be found among 'select tech hardware and services names, industrials, financials, energy and parts of health care that are policy beneficiaries amid higher structural volatility and real rates, and a weak U.S. dollar.' Comcast could see its heaviest internet-subscriber losses ever. Then what? How stock-market investors should trade what could be a historic Fed dissent on Wednesday Royal Caribbean stock gets rocked despite higher demand for cruises. Here's why. 'I have Type 1 diabetes': I'm 64 with a $1.3 million 401(k). Is it too late for long-term-care insurance? Sign in to access your portfolio
CNBC
10-07-2025
- Business
- CNBC
The new bull case for the stock market is looking past short-term risks
One way for investors to justify buying stocks now, despite all of the uncertainty in the macroeconomy, is to operate as if today's news likely won't matter much to the market in a year. Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, said in a note to clients that there is a new "bull case" for the market emerging that considers tariffs to be a "non-event," at least partly because lower oil prices will help to offset inflation concerns. The outlook for corporate profits also gives investors a reason to wave off any negative trends in the upcoming, second-quarter earnings season. "2026 S & P 500 earnings are expected to show accelerating growth from 2025's 7-8% to 13-14% — gains come from margin expansion, tax benefits," Shalett said. Another factor Shalett mentioned is a "bad news is good news" situation with the Federal Reserve, which could deliver rate cuts if the economy starts to weaken. Shalett's theory helps explain why markets have been so calm recently despite the fact that tariff threats from the White House are ramping back up again. President Donald Trump's imposition of 50% tariffs on Brazil this week was even above the level the country faced on April 2, before the market swooned and many global tariffs were delayed. Kristy Akullian, head of iShares investment strategy for the Americas, pointed out in a commentary that July has so far been marked by low trading volumes and low volatility. "Markets have boosted their immunity to uncertainty: neither last week's passage of the [One Big Beautiful Bill Act] nor this week's tariff announcements caused the S & P 500 to budge by more than 1%. In April, policy announcements were met with 11 such days of > 1% swings. Similarly, the VIX now sits below 17; in April it spiked above 60 and averaged 32 over the month. In fact, since the local lows of April 8th, the index has rallied more than 25%, despite the overhang of unresolved trade deals," Akullian said. The VIX refers to the Cboe Volatility Index , which measures the expected moves in the S & P 500 over the next month based on options pricing. .VIX 6M mountain The Cboe Volatility Index is trading well below its highs from earlier this year. Of course, the line between confidence and complacency can be a thin one for investors. Charles Schwab chief investment officer Liz Ann Sonders told CNBC that she sees more downside risk than upside for equities and highlighted a curious divergence in different markets at the moment. "Generally, you've been in this kind of lower yield backdrop since the latter part of May, suggesting that the bond market is pricing in less economic growth. Yet the cyclicals within the equity market are pricing in more economic growth. I think that there's just mixed messages coming from various markets," Sonders said. – CNBC's Michael Bloom contributed reporting.
Yahoo
19-05-2025
- Business
- Yahoo
Why the rally in stocks is destined to fizzle out, according to Morgan Stanley's wealth CIO
The stock market rally will "stall out," Morgan Stanley's Lisa Shalett said. The Magnificent 7 stocks will lose momentum amid decelerating growth and dropping cash levels. Shalett suggested a turn toward beneficiaries of deregulation. Stocks have rallied sharply since April lows but investors shouldn't treat the upside as a blueprint for what's to come, a top Wall Street exec warned last week. Lisa Shalett, the chief investment officer at Morgan Stanley Wealth Management, said she expects slower momentum going forward among key tech stocks. That will jeopardize a sustained rally, she said. "I think we're going to stall out here. I think it's just hard to justify the numbers," she told Bloomberg TV on Friday, emphasizing that the top S&P 500 leaders are trading back at highs from earlier in the year despite a 6% earnings-per-share drawdown. Even for those who still believe the Magnificent Seven stocks' outperformance will last, Shalett listed three reasons to reconsider their bullishness. There's the fact that top-line growth has decelerated, as has free-cash-flow, she said. Typically, Mag Seven stocks don't perform well when the latter declines — the "arms race" to spend on AI has already shrunk free-cash-flow 11%, Shalett outlined. What's more, investors shouldn't forget the wall of uncertainty that still surrounds artificial intelligence, especially in terms of AI competition. Despite current market euphoria, this year's DeepSeek surprise shouldn't be discounted, showcasing that international AI competition is rising. "We fundamentally think it was the wake-up call around global engineering, global innovation, and the fact that none of us know how the movie ends here on Gen AI," Shalett said. Convinced that the AI rally is losing steam, Shalett suggested that investors take profits in tech now and gain exposure to the next beneficiaries: stocks set to rise on industry deregulation. That includes financials, energy, and certain healthcare names. Shalett's forecast isn't necessarily shared by everyone on Wall Street, with opinions split on what comes next after the recent tariff euphoria. Trade deals have revived investor bullishness, sending the S&P 500 up 19% from April's lowest point. Read the original article on Business Insider
Business Insider
19-05-2025
- Business
- Business Insider
Why the rally in stocks is destined to fizzle out, according to Morgan Stanley's wealth CIO
The stock market rally will "stall out," Morgan Stanley's Lisa Shalett said. The Magnificent 7 stocks will lose momentum amid decelerating growth and dropping cash levels. Shalett suggested a turn toward beneficiaries of deregulation. Stocks have rallied sharply since April lows but investors shouldn't treat the upside as a blueprint for what's to come, a top Wall Street exec warned last week. Lisa Shalett, the chief investment officer at Morgan Stanley Wealth Management, said she expects slower momentum going forward among key tech stocks. That will jeopardize a sustained rally, she said. "I think we're going to stall out here. I think it's just hard to justify the numbers," she told Bloomberg TV on Friday, emphasizing that the top S&P 500 leaders are trading back at highs from earlier in the year despite a 6% earnings-per-share drawdown. Even for those who still believe the Magnificent Seven stocks' outperformance will last, Shalett listed three reasons to reconsider their bullishness. There's the fact that top-line growth has decelerated, as has free-cash-flow, she said. Typically, Mag Seven stocks don't perform well when the latter declines — the "arms race" to spend on AI has already shrunk free-cash-flow 11%, Shalett outlined. What's more, investors shouldn't forget the wall of uncertainty that still surrounds artificial intelligence, especially in terms of AI competition. Despite current market euphoria, this year's DeepSeek surprise shouldn't be discounted, showcasing that international AI competition is rising. "We fundamentally think it was the wake-up call around global engineering, global innovation, and the fact that none of us know how the movie ends here on Gen AI," Shalett said. Convinced that the AI rally is losing steam, Shalett suggested that investors take profits in tech now and gain exposure to the next beneficiaries: stocks set to rise on industry deregulation. That includes financials, energy, and certain healthcare names. Shalett's forecast isn't necessarily shared by everyone on Wall Street, with opinions split on what comes next after the recent tariff euphoria. Trade deals have revived investor bullishness, sending the S&P 500 up 19% from April's lowest point.
