Global Strategy Mid-Year Outlook

Morgan Stanley presents a constructive outlook for risk assets, favoring DM equities and US markets while highlighting AI capex as a pivotal force for both earnings growth and credit supply.

Key Takeaways

• 1.The report maintains a 'Constructive, Not Complacent' stance, driven by strong macro/micro fundamentals and a powerful AI-driven capex cycle despite energy-led volatility.
• 2.DM Equities (particularly US) are preferred over EM Equities due to a favorable bull-bear skew and strong earnings from positive operating leverage.
• 3.AI infrastructure financing is becoming a defining theme for corporate credit, leading to supply pressures that may cause modest spread widening despite healthy fundamentals.

Table of Contents

• Key Calls by Asset Class
• Expected Returns and Risk/Reward
• Cross-Asset Strategy: Constructive, Not Complacent
• Global Fixed Income Allocation
• Global Equities Allocation
• US Equities: Strong Earnings Drive the Rolling Recovery
• European Equities
• Asia/EM Equities
• Japan Equities
• China Equities
• Korea Equities
• India Equities
• Latin American Equities
• US Treasuries
• European Government Bonds
• UK Gilts
• Japanese Government Bonds
• Dollar Bloc
• USD
• EMFX and Local Rates
• EM Sovereign Credit
• US Corporate Credit
• European Corporate Credit
• Asia Credit
• Securitized Products
• Munis
• Energy
• Metals
• Agriculture
• Global Quant

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