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Thoughts on the Market

Thoughts on the Market

De: Morgan Stanley
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Short, thoughtful and regular takes on recent events in the markets from a variety of perspectives and voices within Morgan Stanley.

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Episodios
  • How U.S. Industry Is Reinventing Itself

    How U.S. Industry Is Reinventing Itself
    Sep 16 2025
    Our strategists Michelle Weaver and Adam Jonas join analyst Christopher Snyder to discuss the most important themes that emerged from the Morgan Stanley Annual Industrials Conference in Laguna Beach.Michelle Weaver: Welcome to Thoughts on the Market. I'm Michelle Weaver, Morgan Stanley's U.S. Thematic Strategist.Christopher Snyder: I'm Chris Snyder, Morgan Stanley's U.S. Multi-Industry Analyst. Adam Jonas: And I'm Adam Jonas, Morgan Stanley's Embodied AI Strategist.Michelle Weaver: We recently concluded Morgan Stanley's annual industrials conference in Laguna Beach, California, and wanted to share some of the biggest takeaways.It's Tuesday, September 16th at 10am in New York.I want to set the stage for our conversation. The overall tone at the conference was fairly similar to last year with many companies waiting for a broader pickup. And I'd flag three different themes that really emerged from the conference. So first, AI. AI is incredibly important. It appeared in the vast majority of fireside conversations. And companies were talking about AI from both the adopter and the enabler angle. Second theme on the macro, overall companies remain in search of a reacceleration. They pointed to consistently expansionary PMIs or a PMI above 50, a more favorable interest rate environment and greater clarity on tariffs as the key macro conditions for renewed momentum. And then the last thing that came up repeatedly was how are companies going to react to tariffs? And I would say companies overall were fairly constructive on their ability to mitigate the margin impact of tariffs with many talking about both leveraging pricing power and supply chain shifts to offset those impacts. So, Chris, considering all this, the wait for an inflection came up across a number of companies. What were some of your key takeaways on multis, on the macro front? Christopher Snyder: The commentary was stable to modestly improving, and that was really consistent across all of these companies. There are, you know, specific verticals where things are getting better. I would call out data center as one. Non-res construction, as another one, implant manufacturing as one. And there were certain categories where we are seeing deterioration – residential HVAC, energy markets, and agriculture.But we came away more constructive on the cycle because things are stable, if not modestly improving into a rate cut cycle. The concern going in was that we would hear about deteriorating trends and a rate cut would be needed just to stabilize the market. So, we do think that this backdrop is supportive for better industrial growth into 2026.We have been positive on the project or CapEx side of the house. It feels like strength there is improving. We've been more cautious on the short cycle production side of the house. But we are starting to see signs of rate of change. So, when we look into [20]26 and [20]27, we think U.S. industrials are poised for decade high growth. Michelle Weaver: You've had a thesis for a while now that U.S. reshoring is going to be incredibly important and that it's a $10 trillion opportunity. Can you unpack that number? What are some recent data points supporting that and what did you learn at the conference? Christopher Snyder: Some of the recent data points that support this view is U.S. manufacturing construction starts are up 3x post Liberation Day. So, we're seeing companies invest. This is also coming through in commercial industrial lending data, which continues to push higher almost every week and is currently at now record high levels. So, there's a lot of reasons for companies not to invest right now. There's a lot of uncertainty around policy. But seeing that willingness to invest through all of the uncertainty is a big positive because as that uncertainty lifts, we think more projects will come off the sidelines and be unlocked. So, we see positive rate of change on that. What I think is often lost in the reassuring conversation is that this has been happening for the last five years. The U.S. lost share of global CapEx from 2000 when China entered the World Trade Organization almost every year till 2019 when Trump implemented his first wave of tariffs. Since then, the U.S. has taken about 300 basis points of global CapEx share over the last five years, and that's a lot on a $30 trillion CapEx base. So, I think the debate here should be: Can this continue? And when I look at Trump policy, both the tariffs making imports more expensive, but also the incentives lowering the cost of domestic production – we do think these trends are stable. And I always want to stress that this is a game of increments. It's not that the U.S. is going to get every factory. But we simply believe the U.S. is better positioned to get the incremental factory over the next 20 years relative to the prior 20. And the best point is that the baseline growth here is effectively zero. Michelle Weaver: And how does power play into the ...
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    14 m
  • Can Fed Cuts Bring Mortgage Rates Down?

    Can Fed Cuts Bring Mortgage Rates Down?
    Sep 15 2025
    For investors looking to make sense of housing-related assets amidst changes in Fed policy stance, our co-heads of Securitized Product Research Jay Bacow and James Egan offer their perspective on mortgage rates and the market.Read more insights from Morgan Stanley.----- Transcript ----- James Egan: Welcome to Thoughts on the Market. I'm Jim Egan, co-head of Securitized Products Research at Morgan Stanley.Jay Bacow: I'm Jay Bacow, the other co-head of Securitized Products Research at Morgan Stanley.Today we're talking about the Fed, mortgage rates and the implications to the housing market.It's Monday, September 15th at 11:30am in New York.Now Jim, the Fed is meeting on Wednesday, and both our economists and the market are expecting them to cut rates in this meeting – and continue to cut rates at least probably two more times in 2025, and multiple times in 2026. We've talked a lot about the challenges and the affordability in the U.S. homeowners’ market, in the U.S. mortgage market.Before we get into what this could help [with] the affordability challenges, how bad is that affordability right now?James Egan: Sure. And as we've discussed on this podcast in the past, one of the biggest issues with the affordability challenges in the U.S. housing market specifically is how it's fed through to supply issues as the lock-in effect has kept homeowners with low 30-year mortgage rates from listing their homes.But just how locked in does the market remain today? The effective rate on the outstanding mortgage market, kind of the average of the mortgages outstanding, is below 4.25 percent. The prevailing rate for 30-year mortgages today is still over 6.25 percent, so we're talking about two full percentage points, 200 basis points outta the money.Jay Bacow: And that seems like a lot. Has it been that way in the past?James Egan: If we look at roughly 40 years of data ending in 2022, the market was only 100 basis points outta the money for eight individual quarters. The most it was ever out of the money was 135 basis points. We have now been more than 200 basis points out of the the money for three entire years, 12 consecutive quarters. So, this is very unprecedented in the past several decades.But Jay, our economists are calling for Fed cuts, the market's pricing in Fed cuts. How much lower is the mortgage rate going for these affordability equations?Jay Bacow: We actually don't think that the Fed cutting rates necessarily is going to cause the mortgage rate to come down at all. And one way we can think about this is if we look at it, the Fed has already cut rates 100 basis points over the past year, and since the Fed has cut rates 100 basis points in the past year, the mortgage rate is 25 basis points higher.James Egan: Okay, so if I'm not going to be looking at Fed funds for the path of mortgage rates going forward, I have two questions for you.One, what part of the Treasury term structure should I be looking at? And two, you talked about the market pricing in Fed cuts from here. What is the market saying about where those rates will be in the future?Jay Bacow: So, mortgage rates are much more sensitive to the belly of the Treasury curve. Call it the 5- and 10-year portions than Fed funds. They have a little bit of sensitivity to the third year note as well. And when we think about what the market is expecting those portions of the Treasury curve to do, I apologize, I'm going to have to nerd out. Fortunately, being a nerd comes very naturally to me.If you look at the spread between the 5- and the 10-year portion of the treasury curve, 10 years yield about 50 basis points more than the 5-year note. So, you think about it, an investor could buy a 10-year note now. Or they could buy a 5-year note now and then another 5-year note in five years, and they should expect to get the same return if they do either one.So, if they buy the 10-year note right now at 50 basis points above where the 5-year note is. Or they buy the 5-year note, right now, the 5-year note in five years would have to yield 100 basis points above to get the average to be the same. Well, if the 5-year note in five years is 100 basis points above where the 5-year note is right now, mortgage rates are also probably going to be higher in five years.James Egan: Okay, so that's not helping the affordability issues. What can be done to lower mortgage rates from here?Jay Bacow: Well, going back to my inner nerd, if you brought the 5- and 10-year Treasury yields down, that would certainly be helpful. But mortgage rates aren't just predicated on where the Treasury yields are.There's also a risk premium on top of that. And so, if the mortgage originators can sell those loans to other investors at a tighter spread, that would also help bring the rate down. And there are things that can be done on that front. So, for instance, if the capital requirements for investors to own those mortgages go down, that would certainly be helpful.You could try to ...
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    7 m
  • How Cybersecurity Is Reshaping Portfolios

    How Cybersecurity Is Reshaping Portfolios
    Sep 12 2025

    Online crime is accelerating, making cybersecurity a fast-growing and resilient investment opportunity. Our Cybersecurity and Network and Equipment analyst Meta Marshall discusses the key trends driving this market shift.

    Read more insights from Morgan Stanley.


    ----- Transcript -----


    Welcome to Thoughts on the Market. I’m Meta Marshall, Morgan Stanley’s Cybersecurity and Network and Equipment Analyst. Today – the future of digital defense against cybercrime.

    It’s Friday, September 12th, at 10am in New York.

    Imagine waking up to find your bank account drained, your business operations frozen, or your personal data exposed – all because of a cyberattack. Today, cybersecurity isn't an esoteric tech issue. It impacts all of us, both as consumers and investors.

    As the digital landscape grows increasingly complex, the scale and severity of cybercrime expand in tandem. This means that even as companies spend more, the risks are multiplying even faster. For investors, this is both a warning and an opportunity.

    Cybersecurity is now a $270 billion market. And we expect it to grow at 12 percent per year through 2028. That's one of the fastest growth rates across software.

    And here's another number worth noting: Chief Information Officers we surveyed expect cybersecurity spending to grow 50 percent faster than software spending as a whole. This makes cybersecurity the most defensive area of IT budgets—meaning it’s least likely to be cut, even in tough times.

    This hasn’t been lost on investors. Security software has outperformed the broader market, and over the past three years, security stocks have delivered a 58 percent return, compared to just 22 percent for software overall and 79 percent for the NASDAQ. We expect this outperformance against software to continue as AI expands the number of ways hackers can get in and the ways those threats are evolving.

    Looking ahead, we see a handful of interconnected mega themes driving investment opportunities in cybersecurity. One of the biggest is platformization – consolidating security tools into a unified platform. Today, major companies juggle on average 130 different cyber security tools. This approach often creates complexity, not clarity, and can leave dangerous gaps in protection particularly as the rise of connected devices like robots and drones is making unified security platforms more important than ever.

    And something else to keep in mind: right now, security investments make up only 1 percent of overall AI spending, compared to 6 percent of total IT budgets—so there’s a lot of room to grow as AI becomes ever more central to business operations.

    In today’s cybersecurity race, it’s not enough to simply pile on more tools or chase the latest buzzwords. We think some of the biggest potential winners are cybersecurity providers who can turn chaos into clarity. In addition to growing revenue and free cash flow, these businesses are weaving together fragmented defenses into unified, easy-to-manage platforms. They want to get smarter, faster, and more resilient – not just bigger. They understand that it’s key to cut through the noise, make systems work seamlessly together, and adapt on a dime as new threats emerge. In cybersecurity, complexity is the enemy—and simplicity is the new superpower.

    Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.
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    4 m
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