Morgan Stanley upgraded its outlook on US stocks and Treasuries to "overweight", citing reduced tariff risks, no looming recession, and scope for further rate cuts. However, it expects the dollar to remain under pressure due to "a convergence in US rates and growth to peers," it said in a note late Tuesday. "We expect USD assets to broadly outperform the rest of the world, with the notable exception being the dollar itself … against a backdrop of a slowing but still expanding global economy," the note read. The Wall Street brokerage projected the S&P 500 to hit 6,500 by the second quarter of 2026—earlier than previously forecast—while the 10-year Treasury yield is expected to fall to 3.45 per cent over the same period. The index last closed at 5,940.46 and the yield at 4.481 per cent. Despite projecting global real GDP growth to slow from 3.5 per cent in 2024 to 2.5 per cent by year-end, Morgan Stanley sees no recession risk and anticipates earnings revisions to stabilise soon. It also expects a weaker dollar to benefit multinationals. The dollar index, already down 8 per cent this year, is forecast to decline another 9 per cent to 91 over the next 12 months, with the steepest losses expected against the euro, yen, and Swiss franc. Attribution: Reuters Subediting: Y.Yasser
