Via Morgan Stanley analysts, a note saying what they see in the market indicates a wide belief in a "no landing" scenario for the economy, i.e. an expected acceleration in growth. Investors are no longer bracing for a hard (recession) or soft (very slow growth) landing.
- macro data and equity market leadership have started to support the no-landing outcome
- strong economyic data, firmer inflation reports have reduced expectations for FOMC interest rate cuts
Equities outlook:
- broadening of the equity market rally, "led by cyclical industries... which is supportive of the notion that the equity market is beginning to process a better growth environment"
- Morgan Stanley note that a move downside in yields could prompt rotation to a broader group of cyclicals, but that a break higher in yields "could take us back into a narrow market regime"
