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Thoughts on the Market

Thoughts on the Market

By: 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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Episodes
  • Pricing the Conflict With Iran

    Pricing the Conflict With Iran
    Mar 4 2026
    Our Deputy Global Head of Research Michael Zezas and Head of Public Policy Research Ariana Salvatore assess the potential market outcomes of the Middle East conflict, weighing its possible duration and economic impact.Read more insights from Morgan Stanley.----- Transcript -----Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan Stanley's Deputy Global Head of Research. Ariana Salvatore: And I'm Ariana Salvatore, Head of Public Policy Research. Michael Zezas: Today we're discussing the escalating U.S.-Iran conflict, the market reaction, and what investors should be watching for next. It's Wednesday, March 4th at 7:30am in San Francisco. Ariana Salvatore: And 10:30am in New York. Michael Zezas: So, Ariana, I'm in San Francisco at Morgan Stanley's TMT Conference, but obviously events in the Middle East have captured everyone's attention. There's uncertainty around the conflict and really important questions about how it affects all of us. And of course, markets have to discount all sorts of future uncertainty about very specific impacts – to financial asset prices, to commodity prices – and really look at it through that narrow lens.And so, Ariana, the administration has suggested that this conflict and this campaign could last a few weeks. But also it said it could continue as long as it takes. So, what are the clearest signals investors should watch for to gauge duration? Ariana Salvatore: For now, we're focused on three main indicators. First, I would say, and most important, is clarity around the objectives. The president and others in the administration have referenced things like eliminating Iran's missile arsenal, its navy and limiting proxy activity. Those goals are broader than the earlier focus on just the nuclear programs. Each objective, of course, implies a different timeline. A narrower objective likely means a shorter engagement. Broader ambitions, conversely, would extend it. So that's the first thing. Second, obviously extremely important is traffic through the Strait of Hormuz. We'd viewed a full closure as unlikely, given the economic consequences for Iran itself. But tanker flows have at least temporarily fallen close to zero, and that's significant because production across the region has not been impaired. This is not about oil fields going offline. It's about whether or not oil can actually move. If shipping lanes normalize within weeks, markets can recalibrate. However, if flows remain materially curtailed beyond five weeks, the risks rise meaningfully. Third, the frequency of strikes and proxy activity. Sustained or escalating engagement would suggest a longer conflict. Signs of diplomacy, on the other hand, might indicate de-escalation. Michael Zezas: Right. So, let's build on that and talk about oil. And our colleague, Martijn Rats has really laid this out with a lot of different scenarios. But what we're seeing right now is that when it comes to oil, this is really a shock to the transport of it, not necessarily a shock to its production. So, oil supply exists. The question is really – can it be delivered or not? So, if tanker flows normalize and the geopolitical risk premium fades, what Martijn is saying is that global oil prices could move back towards $60 to $65 a barrel. If the logistical disruption lasts four to five weeks, then prices maybe trade in the $75 to $80 range. And if disruption extends beyond five weeks and flows are materially constrained, then you could see a situation where oil prices have to rise towards $120 or $130 a barrel. And at that level, demand destruction is what becomes the balancing mechanism in setting price for oil. So, one signal to watch is longer dated oil prices. Early month contracts can spike during geopolitical stress, but a sustained move materially above $80 to $85 [per] barrel would likely require longer dated prices to move higher as well. And that might signal that markets believe the disruption is persistent and not temporary. Ariana, what about natural gas here? How does gas situation fit into the energy story? Ariana Salvatore: As of this recording, Qatar has halted liquified natural gas production putting roughly 20 percent of global supply at risk. Prices have, as you might expect, risen sharply, which likely reflects expectations of a relatively short disruption. If exports were to resume quickly, prices could retrace. But, of course, if the outage lasts longer, prices could move meaningfully higher. Again, duration of the conflict is really critical here. Michael Zezas: So, let's bring this back to the U.S. Ariana, how does this conflict feed into the domestic, political and economic backdrop? Ariana Salvatore: When we're thinking about the midterm elections later this year, the way we see it, the clearest transmission channel is gasoline prices. Polling shows a majority of Americans oppose military action related to Iran, but voters typically prioritize domestic ...
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    8 mins
  • Travel Becomes a New Growth Engine for China

    Travel Becomes a New Growth Engine for China
    Mar 3 2026

    Our Hong Kong/China Transportation & Infrastructure Analyst Qianlei Fan discusses how China’s travel industry is shifting from a post-pandemic rebound to a multi-year expansion.

    Read more insights from Morgan Stanley.


    ----- Transcript -----


    Welcome to Thoughts on the Market. I’m Qianlei Fan, Morgan Stanley’s Hong Kong / China Transportation Analyst. Today, I'll share my thoughts on why travel is quickly emerging as one of [the] key drivers of China's economic rebalancing.

    It’s Tuesday, March the 3rd, at 2pm in Hong Kong.

    I've just gotten back from my Lunar New Year trip to mainland China. With the longest Chinese New Year break in history, people were out roaming, exploring, laughing, and the whole country felt like it was buzzing with people on a mission to enjoy every minute.

    According to the Ministry of Culture and Tourism, total domestic tourism spending recorded a robust 19 percent year-on-year growth during the holiday. In fact, China’s tourism industry isn’t just rebounding after the pandemic. It’s entering a structurally stronger phase, supported by policy tailwinds, demographic shifts, and a clear pivot toward experience-driven consumption.

    By 2030, tourism revenue could reach RMB 12 trillion – equal to roughly USD $1.7 trillion – implying 11 percent annual growth from the mid-2020s. Over the next five years, cumulative domestic and inbound revenue may approach RMB 50 trillion, or USD $7.2 trillion.

    That scale makes travel more than a cyclical recovery – it’s becoming a core pillar of China’s consumption-led growth. We expect tourism’s share of GDP to rise to about 6.7 percent by 2030, up from 4.8 percent in 2024.

    Domestic travel remains the backbone. People aren’t just traveling again; they’re traveling more than before.

    Policy is reinforcing demand. Extended public holidays, new school breaks, and event-driven tourism are boosting activity. In 2025 alone, around 3,000 large-scale performances attracted more than 43 million attendees. And spending reflects that shift. Domestic tourism spending reached RMB 6.3 trillion in 2025, about 11 percent above pre-COVID levels. Even with slightly lower spend per trip, more frequent travel is lifting overall revenue.

    International travel is emerging as a second growth engine. By 2030, inbound travel could represent 16 percent of total tourism revenue. In late 2025, inbound visitor growth in major cities was up about 30–50 percent year-over-year, supported by expanded visa-free access, which now accounts for the majority of foreign arrivals. These visitors often stay longer and spend more. Outbound travel is strengthening too. International air traffic grew 22 percent in 2025, far outpacing domestic growth, and now contributes a meaningful share of airline revenue.

    Demographics and technology are reinforcing the trend. Younger consumers prioritize travel, while older households – with substantial savings – are beginning to spend more as services improve. At the same time, smart hotels, virtual reality attractions, and data-driven operations are enhancing engagement and willingness to pay.

    This isn’t just pent-up demand. It’s policy, demographics, technology, and supply aligning at once. – with travel at the center of China’s consumption story.

    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 mins
  • The Risks of Private Credit's Software Exposure

    The Risks of Private Credit's Software Exposure
    Mar 2 2026
    Our Chief Fixed Income Strategist Vishy Tirupattur and U.S. Head of Credit Strategy Vishwas Patkar discuss the implications of private credit’s exposure to the software industry.Read more insights from Morgan Stanley.----- Transcript -----Vishy Tirupattur: Welcome to Thoughts on the Market. I am Vishy Tirupattur, Morgan Stanley's Chief Fixed Income Strategist. Vishwas Patkar: I'm Vishwas Patkar, Morgan Stanley's U.S. Head of Credit Strategy. Vishy Tirupattur: While potential disruption from AI has been a key driver for markets [in the] last few weeks, the focus of investor agenda has been in the software sector. On today's podcast, we will talk about software in the credit markets and its implications. It's Monday, March 2nd at 10am in New York. Vishwas, let's start by understanding how the exposure in software manifests in the credit markets. How does it compare to software, say, in the equity market? Vishwas Patkar: Yeah, so the software exposure in credit markets is large, and understandably that's why investors are closely watching what's happening with software in the equity market. But what's interesting and important for investors to note is the exposure in credit is very different from what it is in equities. So, for instance, a good chunk of exposure in the credit market is around private issuers. So, we estimate about 80 percent of companies are private in the whole sample set that we looked at. And that's largely a function of the fact that software is not a big part of the more liquid spaces like Investment Grade and High Yield. But it is heavily represented in the more opaque parts of the market, like leveraged loans, CLOs, and, you know, BDCs. So, our analysis found that about 25 percent of BDC portfolios are in software, closely followed by private credit CLOs. And leveraged loan market was about 16 percent. So, that's an important distinction to keep in mind versus the equity market. The second thing I would flag is – because the software sector grew a lot in the loan market through the LBO wave of 2020 and 2021, it has a weaker credit quality skew to it than the overall market. So about 50 percent of borrowers in the sector are rated B - or lower. So, that's the lowest rungs of the rating spectrum. Many of these software deals were underwritten with higher leverage than the broad market. And as a result of that you also have more front-loaded maturities in the sector, which brings the risks of refinancing, if some of this disruption persists. But Vishy, that's a nice segue to you. Over the past couple of years, you looked at the private credit market in depth and that's where I think the exposure we found is the highest in BDCs, you know, which is the public face of private credit. So, in your assessment, what is the risk of software to private credit, given all of the headlines that are popping up? Vishy Tirupattur: Public face of private credit – Vishwas, that's a great line. BDCs – business development corporations for those who are not familiar – are companies that invest in the debt of small and medium sized companies, sourced through non-bank channels. BDCs fund themselves through equity and debt issuance. So, if you look at the portfolios of BDCs to look at their exposure to software, there's a wide variation across the various BDC portfolios. What makes the assessment of these software risks in BDCs challenging is that many of these companies are private companies without the reporting obligations of public companies. So, no earnings reports, no 10-Ks or cues or broadly publicly available financials look at. So, in effect, these companies need to be re underwritten to evaluate which of these companies would be disrupted from AI; and which companies could actually benefit from AI and see their margins expand. So, in the context of BDCs, liability spreads are something we are watching closely. BDC liability spreads have widened but we think more needs to happen there. The clearing levels need to wait for the full resolution of the companies that benefit and that get hurt by disruption that is still awaited. So, we expect credit spreads of BDCs to remain volatile for some time to come. Vishwas Patkar: Okay. So, seems like this is a significant, or at least a non-trivial risk factor for credit markets, given the growth of the sector, leverage, the skew and quality. But Vishy, do you think this could be systemic for risk markets at large? Vishy Tirupattur: So, I do think that this is a significant risk, but I don't think it's a systemic risk. The amount of leverage in BDC is fairly small. About 2x is the kind of leverage. You compare that to the kind of leverage that existed in the financial system before the financial crisis – that’s orders of magnitude smaller risk. And also the linkage to the banking system comes through the back leverage provided to the non-bank lenders. But this leverage is substantially risk remote with very high ...
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    7 mins
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