Morgan Stanley: Business Cycle More Important Than Election Outcome

With the US election heating up, investors are grappling with the potential impact of different outcomes. However, Morgan Stanley analysts believe the current stage of the business cycle might be a more significant factor for the market in the near term.

Focus on the Economic Engine

• Later Cycle Stage: Morgan Stanley argues that the US economy is currently in a later stage of the business cycle, historically a period where investors favor established companies over riskier cyclical plays.
• Election Noise Secondary: While the election will undoubtedly generate market noise, the analysts believe focusing on the underlying economic trends could be more rewarding.

Cyclical Plays: Selective Approach

• Quality Over Growth?: While small-cap cyclicals might outperform in earlier stages of the cycle, Morgan Stanley suggests a more cautious approach in the current environment. They recommend prioritizing quality and established companies within cyclical sectors.
• Large-Cap Industrials in Favor: The analysts highlight large-cap Industrials as a potentially favorable area, citing their recent performance and undervalued positions.

Long-Term Considerations

• Election Impact May Emerge Later: Morgan Stanley acknowledges that the election could have a more prominent impact on the market further down the line, depending on the winning candidate's policies.
• Stay Informed and Diversify: Investors are encouraged to stay informed about both the business cycle and potential election outcomes, while also maintaining a diversified portfolio to manage risk.

Explore Sector-Specific ETFs

While Morgan Stanley emphasizes quality and established companies, if you're interested in exploring specific sectors, Exchange-Traded Funds (ETFs) can be a helpful tool.

Use the FMP ETF Holdings API to Research ETFs: This API allows you to search for ETFs by sector or keyword and see their holdings. This can help you identify ETFs that focus on established companies within cyclical sectors, aligning with Morgan Stanley's current recommendations.

Learn More About FMP ETF Holdings API: FMP ETF Holdings API

Remember, this information is for educational purposes only and should not be considered financial advice. Always conduct your own due diligence before making any investment decisions.