Morgan Stanley Optimistic on U.S. Assets Amid Global Trade Developments

Morgan Stanley has expressed confidence in U.S. stocks and Treasuries, shifting its position to 'overweight'. This move is fueled by fewer tariff concerns, no recession prediction, and potential for more rate cuts, according to a note released late Tuesday by the Wall Street firm.

While Morgan Stanley is optimistic about most U.S. assets outperforming globally, with the dollar as an exception, it cited strong performance against a backdrop of a slowing, yet still expanding global economy. The dollar, it said, is expected to weaken due to a convergence in U.S. rates and growth with other regions.

Despite not foreseeing a recession, Morgan Stanley anticipates global GDP growth slowing to 2.5% by year's end from 3.5% in 2024. U.S. corporate earnings are expected to recover soon, with a weak dollar aiding multinational companies. The S&P 500 target has been lifted to 6,500 by 2026, while Treasury yields and the dollar index are projected to fall further.

(With inputs from agencies.)