Pivot from stocks to bonds because investors are 'fighting the Fed', Morgan Stanley says
despite policymakers' commitment to hiking and holding interest rates if needed, a top Morgan Stanley strategist has said.
Morgan Stanley Wealth Management investment chief Lisa Shalett is still cautious about equities despite an early-year rally fueled by the expectation that the cost of borrowing will have started falling by the end of 2023. "Problematically, equity and credit markets are aggressively fighting the Fed, with valuations only supported by assumptions of ample rate cuts," she wrote in a research note Monday.The old adage"Don't fight the Fed" refers to the idea that investors should align their portfolios to benefit, rather than lose out, from the US central bank's monetary policies.
The Fed raised interest rates from near-zero in March to 4.50-4.75% currently, hinting more hikes could still come. and then hold them there for the whole of 2023, in a bid to tame US inflation to its 2% target level.But the stock market has pushed back against that assumption so far in 2023. The benchmark
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