American Invest Hub
  • Politics
  • Investing
  • Business
  • Latest News

American Invest Hub

  • Politics
  • Investing
  • Business
  • Latest News
Business

Are investors overlooking financial stocks in favor of defensive trades? Morgan Stanley thinks so

by admin October 15, 2024
October 15, 2024
Are investors overlooking financial stocks in favor of defensive trades? Morgan Stanley thinks so

Investors are currently focused on defensive trades, missing out on the strength of the economy, according to a report from Morgan Stanley.

The firm has identified significant opportunities in underappreciated sectors, particularly within financial stocks.

Recently, Morgan Stanley upgraded cyclical stocks to an “overweight” position compared to defensive sectors.

The report emphasizes that net exposure to financials is alarmingly low, residing in the bottom 15th percentile of historical data dating back to 2010.

As illustrated in accompanying charts, the financial sector is the least owned compared to others.

Mike Wilson, the bank’s chief investment officer and head of US equity strategy, pointed out several factors that could positively impact financial stocks.

He stated:

In our view, this creates opportunity in [the financial] sector that we upgraded to overweight last week given: rebounding capital markets activity, a better loan growth environment in 2025, an acceleration in buybacks post Basel Endgame re-proposal, and attractive relative valuation.

Bank stocks have become increasingly appealing due to improved valuations following a de-risking phase last month, during which large-cap dealers expressed caution about their operating conditions.

This caution has led to lowered expectations for earnings season, allowing major lenders to surpass forecasts more easily.

Following the release of better-than-expected earnings reports last week, both JPMorgan and Wells Fargo have seen notable increases in their stock prices, rising by 3.8% and 8.8%, respectively, since Friday’s market open.

Despite these developments, Wilson observed a continued lack of market interest in financial stocks.

This trend extends beyond banking; investors are largely shunning other cyclical sectors, opting instead for defensive and quality stocks.

Utilities, healthcare, and real estate, which are considered defensive plays, account for some of the highest net exposure in investor portfolios.

Wilson contended that this positioning indicates investors are preparing for a soft-growth scenario, which seems increasingly unlikely based on recent macroeconomic trends.

Although Morgan Stanley had previously shifted to a neutral stance on cyclicals versus defensives at the end of last month, the firm upgraded cyclicals to an overweight position last week after the jobs report exceeded Wall Street expectations.

“As several key macro data points have come in better than expected (namely the jobs report and the ISM Services Index) following the Fed’s 50bp rate cut, cyclicals have begun to show relative strength,” Wilson noted.

Additionally, rising yields in the rates market suggest diminishing growth concerns.

The report indicates that cyclical sectors such as industrials, financials, and energy typically perform better when yields increase, while defensive stocks tend to decline in response to rising rates.

The post Are investors overlooking financial stocks in favor of defensive trades? Morgan Stanley thinks so appeared first on Invezz

0
FacebookTwitterGoogle +Pinterest
previous post
Alibaba stock forecast: is BABA a good buy now?
next post
Dollar hits two-month high as yen nears 150/$ amid rate cut speculation

Related Posts

KOSPI Index forms a risky pattern amid Samsung,...

December 12, 2024

Litecoin price jumps 30% as SEC invites public...

January 30, 2025

Dow closes at record high above 40,000 to...

May 20, 2024

GE Aerospace stock price forms a risky pattern...

January 20, 2025

Long TIXT: AI Growth and Bullish Signals Point...

November 12, 2024

Paramount merger sparks concern among movie theater owners

July 11, 2024

Bolivian bank Banco Bisa launches USDT custody service

October 28, 2024

Baltimore businesses see bridge fallout as a hurdle...

April 9, 2024

Volvo’s Q3 earnings fall short: stagnant demand raises...

October 18, 2024

Reckitt Benckiser stock jumps 10% on profit beat,...

July 24, 2025

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Latest News

    • How Donald Trump’s immigration crackdown may tank the labor market

      August 4, 2025
    • Trump’s tariff threat looms over India’s Russian oil deals

      August 4, 2025
    • Trump moves nuclear submarines near Russia: what triggered the move and what’s ahead

      August 3, 2025
    • BOE rate cuts offer little relief as UK households face mounting financial strain

      August 3, 2025
    • Retail investors shift focus to Europe as US valuations stretch

      August 3, 2025

    Categories

    • Business (3,583)
    • Investing (2,703)
    • Latest News (2,031)
    • Politics (1,530)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: americaninvesthub.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 americaninvesthub.com | All Rights Reserved