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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
  • Economic Roundtable: Energy Shock & Central Banks’ Action

    Economic Roundtable: Energy Shock & Central Banks’ Action
    Apr 14 2026
    In this first of a two-part discussion, our Global Chief Economist Seth Carpenter leads a discussion with chief regional economists Michael Gapen, Jens Eisenschmidt and Chetan Ahya on impacts of the conflict in Iran and how central banks are responding.Read more insights from Morgan Stanley.----- Transcript -----Seth Carpenter: Welcome to Thoughts in the Market. I'm Seth Carpenter, Morgan Stanley's Global Chief Economist and Head of Macro Research. And today we're going to kick off our quarterly economic roundtable. And this is where we try to step back a little bit from the headlines and the day-to-day changes in markets and try to put the global picture together and frame it for you. In the first of this two-part discussion, we're going to cover the implications of the oil price shock for energy, inflation, and for central bank policy. As always, I'm joined by the Chief Regional Economists here at Morgan Stanley. I've got Michael Gapen, our Chief U.S. Economist, Chetan Ahya, our Chief Asia Economist, and Jens Eisenschmidt, our Chief Europe Economist. It's Tuesday, April 14th at 10am in New York. Jens Eisenschmidt: And 3pm in London. Chetan Ahya: And 10pm in Hong Kong. Seth Carpenter: So, let's just jump right into this. Over the past several weeks, global markets have been dominated by one story. The escalation, de-escalation, the news flow back and forth about the conflict in Iran and the ripple across energy markets, inflation, and growth. Our view has been that even if we don't see another huge leg up in the price of energy and another surge in volatility across financial markets, the persistence of the shock in terms of disrupted supply will be at least as important, if not more so for markets. So, let me start here in the U.S., Mike. You and I have each had lots of conversations with clients about how the Fed's going to react. Market pricing moved a lot before, has retraced, and now is kind of looking at no change in policy for this year, give or take. Your baseline remains that the Fed will have an easing bias and that we'll end up with a couple of cuts later this year. Can you walk us through that thinking, and also where the debate is with clients? Michael Gapen: Sure. So, the evidence in the data… This goes back, let's call it several decades now – that oil price shocks in the U.S. do tend to push headline inflation higher by definition. But they have very limited second round effects on core inflation. And the higher oil prices go, the more likely it is that you get some demand destruction, some weakness in spending, maybe even some weakness in hiring. So, there is a bit of a non-linearity here. In our baseline where oil is elevated, but let's say not excessively high, I can completely buy the argument that the Fed is on hold assessing the evolution of the data and wondering are there second round effects on inflation? Or is this weakening demand? So, Seth, our view is that the Fed is right in its assessment that tariff passed through to goods prices will eventually moderate. And that the oil price effect on headline will diminish. And later this year, core inflation moderates. That should open the door for the Fed to cut two times this year. I do think that the wrong thing to do in this situation is to raise rates into this… Seth Carpenter: I agree with you. Michael Gapen: Yeah. So, I think it's… The Fed's on hold or their cutting. If we're right on where inflation goes, that can open the door to cuts. But to your point, where is the investor debate right now? I think the knee jerk reaction from markets is – the Fed's on the sideline, for, let's call it the foreseeable future. Which as you noted in this market is day-to-day headline to headline. And the Fed will assess where to go later this year. We think they can cut. But I think in general, the Fed is either on hold or cutting. I think the wrong thing to do right now is raise rates. Jens Eisenschmidt: Yeah, let me jump in maybe here from Europe where in theory it's the same problem. Just that the answer that the central bank is likely to give in Europe is slightly different from the one in the U.S. So, the debate we have with clients is not so much about whether or not the ECB is going to hike rates. It's more about how much it will do or have to do this. I mean, again, it has a lot to do with the way oil prices in the end, end up trading. It will be a lot more inflation or less. But it has also to do with the way the mandates are constructed. So, the ECB really has a single inflation mandate and not a dual mandate like the Fed in the case of the U.S. So, there's much more attention on inflation. Next to that, we have stronger second round effects. Historically, we know that from the data. So, it's clear and understandable why ECB policy makers all came out cautioning against that inflation coming, and sort of mulling what had to be done there. We had some leaks out of the governing council ...
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    13 m
  • Mounting Evidence of a Market Rebound

    Mounting Evidence of a Market Rebound
    Apr 13 2026
    Our CIO and Chief U.S. Equity Strategist Mike Wilson shares his perspective on why investors should position for a stock market recovery despite ongoing uncertainty.Read more insights from Morgan Stanley.----- Transcript -----Welcome to Thoughts on the Market. I'm Mike Wilson, Morgan Stanley’s CIO and Chief U.S. Equity Strategist.Today on the podcast I’ll be discussing why equity investors – sometimes – need to look away from the headlines.It's Monday, April 13th at 11:30am in New York.So, let’s get after it.Today I want to talk about something I think a lot of investors are struggling with right now – and that’s timing. When I talk to people, markets still feel fragile to most. There’s uncertainty around geopolitics, central banks, oil… You name it. But when I look at what the market is actually doing; not what it feels like, but what it’s telling us – I come away with a very different conclusion. The market is further along than most people think in this correction.In fact, over the past couple of weeks, we’ve seen the S&P 500 bounce meaningfully. Almost 7 percent from the lows after holding that critical 6300 to 6500 range that we’ve been focused on. To me, that’s not random. That’s the market carving out a low ahead of an all-clear signal. And stepping back, my broader view hasn’t changed.I still think we’re in a new bull market that began last April, coming out of that rolling recession between 2022 and 2025. This correction is part of that cycle; not the end of it. And importantly, a lot of the heavy lifting has already been done.Valuations have compressed significantly. Forward price/earnings multiples have fallen about 18 percent from top to bottom. And beneath the surface, more than half of stocks are down 20 percent or more. That’s a market that has already discounted a lot of risk – whether it’s the war, private credit concerns, or AI disruption.At the same time, earnings are moving in the opposite direction. Trailing earnings growth is running around 15 percent, and forward earnings growth is up over 20 percent. That combination of falling multiples and rising earnings is a classic bull market correction behavior. Not a bear market. And that’s why I think many are misreading this environment.One area where I think that’s especially clear is energy. If you look at the price action, energy stocks appear to have already peaked in relative terms. That’s often a signal that the underlying commodity – in this case oil – may also be peaking. Or at least it’s stabilizing.Which brings me to what I think is really driving volatility now: rates.We’re back in a regime where stocks and yields are negatively correlated. That means higher rates are a headwind for equities again, and the recent hawkish tone from central banks that’s focused on inflation is creating tighter financial conditions. In my view, that’s the final hurdle. Not the war. Not oil. But monetary policy. And here’s the interesting part. Tightening financial conditions are also what ultimately force central banks to pivot. So the very thing creating anxiety today may be what sets up relief tomorrow.Now, if we’re in the later stages of this correction, the next question is positioning. For me, it’s still about a barbell. On one side, I like cyclicals like Financials, Industrials, and Consumer Discretionary – where the earnings remain strong and valuations have reset. On the other side is quality growth. In particularly the hyperscalers; where sentiment has been washed out, but fundamentals remain intact. That combination has worked well off the lows so far, and I think it continues to make sense here.When I zoom out even further, there’s a bigger theme developing as well. And that’s the rebalancing of the economy, a core theme we discussed in our 2026 outlook back in November. We’re starting to see hard evidence that growth is shifting, from the public to the private economy. Private payrolls are strengthening, capital investment is picking up, and companies are behaving as if the current uncertainty is temporary – not structural. This is the rolling recovery on track.At the same time, AI is acting more as a margin tailwind than a disruption, at least in the near term. And this supports operating leverage across many industries. All of that reinforces my view that the recovery is real. And still has room to run.So when I put it all together, here’s where I land:The market has already discounted a lot of bad news. It’s adjusted valuations, reset positioning, and absorbed market risks. What risk remains is policy, and how long rates and liquidity stay restrictive. But markets don’t wait for clarity on that. They move ahead of it.So, here’s my advice. Take advantage of any further worries and put capital to work before it's obvious. Because the market waits for no one.Thanks for tuning in; I hope you found it informative and useful. Let us know what you think by...
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    5 m
  • Making Sense of Mixed Market Signals

    Making Sense of Mixed Market Signals
    Apr 10 2026

    Despite a historic disruption to global energy markets, the stock market remains resilient. Our Global Head of Fixed Income Research Andrew Sheets suggests U.S. markets may offer a steady course in the near term.

    Read more insights from Morgan Stanley.


    ----- Transcript -----


    Andrew Sheets: Welcome to Thoughts on the Market. I'm Andrew Sheets, Global Head of Fixed Income Research at Morgan Stanley.

    Today on the program: Trying to square conflicting market signals.

    It's Friday, April 10th at 2pm in London.

    At one level, it is all still very serious. The world remains in the midst of – and this is not an exaggeration – the worst disruption to global energy markets in history. One-sixth of global oil production remains trapped behind the Strait of Hormuz. And the price of so-called ‘Dated Brent,’ the price that you pay to get oil delivered in the near term, is over $130 a barrel. More than double its price at the start of the year.

    But markets? Well, year-to-date, U.S. stocks and bonds are roughly unchanged. Both have seen large swings only to return to about where they've started. An investor who only occasionally checks the markets could be forgiven for looking at their portfolio this weekend, assuming a pretty dull 2026, and going back to watching the Masters tournament.

    How do we square this? For stocks, two dynamics are important. First, despite oil prices, earnings estimates, especially in the United States, continue to move higher. Those estimates may prove wrong. But analysts have been incrementally more optimistic, particularly as technological investment continues at pace.

    Stocks are also fundamentally about the future. Current prices should reflect the discounted value of earnings between now and, well, forever. And so mathematically, if the longer-term outlook can hold up, a weak three-month period in the near term, say, due to energy disruption, simply doesn't have to matter as much – mathematically.

    Bonds, in contrast, are currently stuck between two pretty strong opposing forces. Higher inflation driven by tariffs and oil is typically bond negative. But bonds also tend to do well if there are higher risk to growth.

    And so, the key question is whether a prolonged energy shock finally forces central banks to prioritize these growth risks over currently elevated inflation. So far, 2026 has been anything but easy despite the lower headline changes in markets. Morgan Stanley data suggests that March was the second worst month for equity hedge funds in the last decade. And so, with some humility, we'd focus on three points.

    First, we think U.S. stocks and bonds have an advantage at the moment over their global peers. U.S. earnings growth is stronger. The U.S. economy is less energy sensitive. And the U.S. central bank, the Federal Reserve, we think is more likely to cut rates faster if there's more weakness in growth.

    Second, we think the bond markets ultimately resolve their tensions at lower levels of yield. A quicker resolution would reduce inflation risks while a more prolonged disruption is going to weigh seriously on growth. The bond unfriendly middle ground, where we are now, simply seems unlikely to persist.

    Third, amidst the volatility, relative valuation still matters, and there are still interesting things. For example, credit spreads in Asia look extremely tight given the region's exposure to high oil prices. And by contrast, as my colleague Mike Wilson has commented on this program earlier, large cap technology stocks have derated significantly – and now trade at similar valuations to the consumer staple sector, despite having roughly three times the earnings growth as well as low energy exposure.

    We are once again heading into an uncertain weekend. But preferring U.S. markets, expecting lower yields, and trying to stay focused on relative value are a few of the ways we're trying to navigate it.

    Thank you as always, for your time. If you find Thoughts on the Market useful, let us know by leaving a review wherever you listen. And also tell a friend or colleague about us today.
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    4 m
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