Morgan Stanley Sees Stock Swings on Debt Ceiling Debate

A historical analysis by Morgan Stanley strategists showed energy and utilities stocks to have been the top relative performers during previous debt ceiling debates, with technology, health care, consumer staples and dividend growth performing well following a resolution.

The impact of the impasse on U.S. stocks has been minimal so far as investors also monitor the outlook for economic growth and corporate earnings.

Although the first-quarter reporting season has been largely better than feared, Wilson said he remains bearish in his forecast for full-year profits amid slowing economic growth.

“The market is speaking loudly under the surface — it is bracing for further macro and earnings disappointments,” the strategist said. That has made investors reluctant to pile into sectors such as regional banks and lower-quality cyclicals despite their recent underperformance, he said.

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