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Morgan Stanley: Funds May Shift from Tech Stocks, US Stocks Could Transition to Broader Rotation

On June 15, Morgan Stanley stated that the upward structure of the US stock market may be changing, with funds expected to flow from the highly valued technology sector to a broader range of cyclical industries. The strategy team led by Michael Wilson noted that as geopolitical risks ease, oil prices decline, and pressures on interest rates and the dollar lessen, the market environment is gradually becoming favorable for the performance of economically sensitive assets, which may present opportunities for sectors that have previously underperformed to catch up. The report indicated that the recent rally in US stocks has primarily focused on technology stocks, but cyclical industries (including discretionary consumer goods, transportation, and regional banks) are still underrepresented, indicating potential for capital inflow. Recent expectations surrounding the easing of US-Iran tensions and improvements in passage through the Strait of Hormuz have also boosted market risk appetite. Karen Ward, a strategist at JPMorgan Asset Management in Europe, similarly pointed out that falling oil prices could become an important support factor for the stock market and may encourage global central banks to further shift towards easing policies. She anticipates that oil prices may fall to around $70 per barrel in the short term. Additionally, the Deutsche Bank strategy team believes that the long-term relative advantage of US stocks may weaken, while the European market, with a higher proportion of cyclical stocks, presents relative attractiveness. Overall, institutions generally believe that if geopolitical risks continue to cool and inflation declines, the US stock market may transition from a 'tech-dominated structural market' to a 'more balanced cyclical rotation market.'

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