In light of the ongoing Middle East conflict, Morgan Stanley has decided to downgrade global equities while upgrading cash and U.S. government bonds.
The firm, on Friday, adjusted its rating on global equities to “equal weight” from “overweight”, while raising U.S. Treasuries and cash to “overweight” from “equal weight,” reported Reuters.
Strategists at the firm pointed out the increasing risk asymmetry in asset outcomes due to the unpredictable impact and duration of oil supply disruption. Brent crude has seen a sharp 59% increase this month, surpassing gains observed during the 1990 Gulf War.
At 7:14 AM ET, Brent crude oil is trading 2.19% higher at $115.03 per barrel.
The brokerage warned of a possible 25% reduction in global equity valuations if oil prices continue to hover around $150-$180 per barrel. Consequently, Morgan Stanley has reduced its overall equity exposure, downgrading U.S. and Japanese stocks to “equal weight”.
Despite these changes, the firm still prefers U.S. stocks over …
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