Episode summary
A New Playbook for Equity Investors
Thoughts on the Market (Morgan Stanley)
· · 14 min · Hosts: Serena Tang · Guests: Andrew Slimmon, Jitania Kandhari
Summary
The discussion framed 2026 as a more favorable but less concentrated year for equities. One guest argued the market is in a late-cycle phase rather than an end-cycle phase: the 2022 bear market reset sentiment, 2023 and 2024 were marked by pessimism, and a more optimistic stance now reflects supportive policy rather than euphoria. Another guest said monetary easing and expected fiscal relief make equities attractive, especially in procyclical areas such as finance, industrials and technology.
A major theme was that real rates may be capped by debt arithmetic and by markets themselves, limiting how far yields can rise even if inflation surprises. The panel also argued that AI should broaden, not narrow, market leadership. Rather than trying to pick a single winning tech name, they expect AI to lift productivity and margins across many industries, similar to the internet cycle.
Outside the US, the guests said Europe, Japan, emerging markets, India, Latin America and selected Asian supply-chain beneficiaries look more compelling as cyclical and value leadership improves. They see 2026 as a year when portfolio exposure should broaden alongside market leadership.
Key takeaways
- One guest thinks 2026 is late cycle but not end cycle, with more volatility and compressed returns ahead rather than a terminal bear market.
- The guests expect supportive monetary easing and fiscal policy to favor procyclical sectors like finance, industrials and technology.
- Another guest argues real rates are structurally capped because debt dynamics make persistently high real yields hard to sustain.
- The panel sees AI as a broad productivity theme, with benefits likely spreading beyond the mega-cap leaders into many industries.
- They said non-US opportunities have improved as Europe, Japan, emerging markets and parts of Latin America show stronger cyclical signals.
Notable quotes
“I think it's late cycle but it's not end of cycle. And that's my theme is late cycle but not end of cycle”
“Equities do well when the Fed is easing and that's one of the reasons why I think it's not end of cycle”
“I mean like the structural template within which I'm operating. and real rates here defined by the tenure on the Treasury yield adjusted for CPI”
“now it's going to be about breadth. And if you look at where the concentration was, it was in the mega 7 in the AI trade”
“I think to be a great investor, you have to be aware of the macro”
How the episode opens
Welcome to Thoughts on the Market. I'm Serena Tang, Morgan Stanley's chief cross asset strategist. Today we're revisiting the 2026 global equity outlook with two senior leaders from Morgan Stanley Investment Management.
I'm Anderson Sullman, head of applied equity team within Morgan Stanley Investment Management. And I'm Jatanya Kandhari, deputy CIO of the solutions and multiasset group, portfolio manager for passport strategies and head of macro and thematic research for emerging market equities within Morgan Stanley Investment Management. It's Tuesday, February 3rd at 10 a.m.
in New York. So, as investors are entering in 2026 after several years of very strong equity returns with policy support reacelerating, as regular listeners have probably heard, Mike Wilson, uh, who of course is a CIO and chief US equity strategist for Morgan Stanley. His view is that we ended a three-year rolling earnings recession in last April and entered a rolling recovery and a new bull market.
Now Andrew, in the spirit of debate, I know you have a different take on valuations and where we are at in the cycle. I'd love to hear how you're framing this for investment management clients. Yeah, I mean I guess I focus a little bit more on the behavioral cycle and I think that from a behavioral cycle we're following a very consistent pattern which is we had a bad bare market in 2022 that bottomed down 25% and that provided a wonderful opportunity to invest but early in a behavioral cycle investors are very pessimistic and that was really the story of 23 and really 2024 which were investors you were negative on equities.
The ratios were all very negative and investors sold out of equities. And that's consistent with a early cycle. And then as you move into the third and fourth year, investors tend to get more optimistic about returns.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- equity investors
- monetary and fiscal policy
- market leadership
- investment trends
- cross-asset strategy
Companies and tickers mentioned
- MS
- Morgan Stanley
Watch the episode
Watch “A New Playbook for Equity Investors” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Thoughts on the Market (Morgan Stanley), this episode and its artwork belong to Morgan Stanley. Octagon is not affiliated with the show; this page is an independent summary.
