Main US indexes advance; Nasdaq out front
Tech leads S&P sector gainers; Energy weakest group
Euro STOXX 600 index up ~0.4%
Dollar, gold fall; crude down >2%; bitcoin up ~2.5%
US 10-Year Treasury yield edges down to ~4.41%
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AS THE MARKET CLIMBS A WALL OF WORRY, PICK YOUR SPOTS TO REACH NEW HEIGHTS
Technical momentum, quiescent implied volatility and improved financial conditions have underpinned the recent equity market rally.
Lisa Shalett, chief investment officer of Morgan Stanley $(MS)$ Wealth Management, believes investor skepticism is still elevated, but the market climbing a “wall of worry” may be the near-term path of least resistance.
"We also acknowledge that the outline of a new bull case based on a 2026 capex spending boom is emerging," she writes in a note out on Monday from the MS Global Investment Committee $(GIC)$.
Still, MS perceives almost no clarity on final tariff and trade terms, while at the same time Shalett believes that geopolitical risks remain insufficiently priced in, amid rising labor market uncertainty.
"As risk managers first, we are hedging over the summer, with a focus on reliable dividends and cash flow. Watch policy developments around tariffs, taxes and deregulation for indications of 'certainty,'" she writes.
Shalett would consider increasing active stock picking, as the passive index undergoes compositional rotation, with the Mag 7 no longer acting as a correlated block.
She says to use opportunities to rebalance and position for potential 5%–10% U.S. equity returns amid increased volatility, higher real rates and a weaker U.S. dollar.
Along with this, Shalett would diversify with positions in international equities, commodities and hedge funds.
Energy/energy infrastructure is MS' most preferred tactical long recommendation.
She also says that "overweighting short-to-neutral-duration investment grade and municipal bonds still makes sense."
(Terence Gabriel)
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EARLIER ON LIVE MARKETS:
HOW DO YOU LIKE NEW YORK IN JUNE NOW? CLICK HERE
U.S. STOCKS GREEN AT THE TOP OF FED WEEK CLICK HERE
S&P 500 INDEX LOOKING TO GET BACK ON TRACK CLICK HERE
THE CASE FOR EUROPE: UBS FINDS 'MOSTLY SCEPTICISM' CLICK HERE
DOMESTICS TO KEEP OUTSHINING EXPORTERS - JPM CLICK HERE
EUROPE'S STOCKS RESILIENT CLICK HERE
BEFORE THE BELL: EUROPEAN FUTURES STEADY, EYES ON KERING CLICK HERE
MARKETS IN WAIT-AND-SEE MODE ON MIDEAST CLICK HERE
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