Morgan Stanley issues sharp take on the stock market
- Finance
ThePostMaster- 0
- 10 minutes read
Morgan Stanley thinks that Mr. Market just made a mistake.
Strategist Katie Huberty, speaking with Bloomberg, laid out the case that the recent stock market sell-off hasn’t been selective. In fact, she argues that it has been “indiscriminate,” where investors continue dumping stocks linked with the AI trade without separating the wheat from the chaff.
Huberty’s broader point is that we’re still in the early innings of what could become a whopping $10 trillion capital-spending cycle, driven by major productivity gains.
However, the markets don’t usually move in straight lines, which is why it’s easy to lose out on the nuance when positions shift so quickly.
The software and services space, in particular, has been under considerable duress of late. For context, here are five of the biggest enterprise-software names that have taken major hits over the past month.
Simultaneously, we argue that the leadership is broadening and AI adoption isn’t just about the flashy chipmakers and the big hyperscalers.
I covered Bank of America analyst Michael Hartnett, who had a similar take, warning that the stock market’s “easy” leadership era is fading away quickly.
Given that development, he argued that investors should turn their attention toward “unloved” pockets of the market, including small caps, REITs, and emerging markets, as these segments are the first to reflect a rotation.
If Huberty is right, this may not be the end of the AI trade, but the beginning of a major rotation.
Morgan Stanley:7,800 (year-end 2026 target)
J.P. Morgan:7,500 (year-end 2026 target, with upside case over 8,000 if the Fed cuts more)
Bank of America Global Research:7,100 (year-end 2026 target, a more cautious “priced for perfection” setup)
Barclays:7,400 (year-end 2026 target after bumping its forecast)
UBS Global Research:7,500 (year-end 2026 target linked to AI momentum along with earnings strength)
Source: Reuters
We aren’t seeing selective selling in the stock market, where a bunch of fundamentally strong businesses are being trimmed without much nuance, Huberty argues. She believes the major shift is from AI builders to AI adopters.
According to Morgan Stanley’s data, businesses that have been actively embedding AI into their operations are experiencing margin expansion at nearly half the pace of major benchmarks such as the S&P 500 and MSCI World.
