Indian equities are set to reverse their historic underperformance against emerging market peers next year, powered by government policy actions, according to Morgan Stanley https://t.co/1fPogl5R6r ...

November 17, 2025 07:06 AM GMT US Rates Strategy | North America The Market-Implied Path for Fed Policy Is Priced for Productivity Our economists' 2026 outlook envisions four possible paths for the US economy and resulting Fed policy. The current market- implied path for Fed policy aligns most closely with the likely path in a scenario where AI-driven productivity gains exceed expectations. Stay long 5y US Treasuries. Key Takeaways Please add me to your distribution list. M Idea Morgan Stanley & Co. LLC Mat ...

Group 1 - A total of 509 overseas institutions have conducted research on 109 listed companies since November, with a focus on the electronics and machinery equipment sectors, which attracted 22 and 15 companies respectively [1] - Morgan Stanley noted that the Chinese stock market has experienced a strong rebound, making it one of the best-performing markets globally this year, and expects moderate growth by 2026 [1] - If China can escape deflation sooner, achieve more technological breakthroughs, and improve the geopolitical environment, Morgan Stanley's optimistic outlook on the Chinese economy will further increase [1] Group 2 - Morgan Stanley set target levels for major stock indices by December 2026: Hang Seng Index at 27,500 points, Hang Seng China Enterprises Index at 9,700 points, and CSI 300 Index at 4,840 points, indicating potential upside of approximately 4%, 4%, and 5% respectively from current levels [4] - CITIC Securities reported that the total revenue of the A-share electronics industry grew by 15% year-on-year in the third quarter, with net profit attributable to shareholders increasing by 46%, indicating continued industry prosperity, driven primarily by artificial intelligence [4]

Market Overview - U.S. stock markets are experiencing a successful year, with major indexes like the Dow, S&P 500, and Nasdaq Composite up 11.2%, 14.8%, and 18.8% respectively [2] - The technology sector, particularly driven by advancements in generative and agentic artificial intelligence (AI), is the primary force behind this rally, although the finance sector has also contributed with the Financial Select Sector SPDR (XLF) up 8.5% year to date [3] Recommended Stocks for 2026 - Five finance stocks are recommended for investment in 2026, having risen over 30% this year: Morgan Stanley (MS), Interactive Brokers Group Inc. (IBKR), Robinhood Markets Inc. (HOOD), Cboe Global Markets Inc. (CBOE), and Invesco Ltd. (IVZ) [4][9] - All five stocks currently hold a Zacks Rank 1 (Strong Buy), indicating potential for further upside [4] Morgan Stanley (MS) - Morgan Stanley's focus on wealth and asset management, along with strategic acquisitions like EquityZen, is expected to enhance revenue growth, with projected increases of 11.7% in total revenues and 12.8% in investment banking fees for 2025 [7] - The firm has an expected revenue growth rate of 3.9% and earnings growth rate of 5.8% for next year, with a recent 3.7% improvement in the Zacks Consensus Estimate for earnings [10] Interactive Brokers Group Inc. (IBKR) - IBKR's revenue growth is supported by proprietary software development, lower compensation expenses, and expansion into emerging markets, with an expected revenue growth rate of 5.5% and earnings growth rate of 8.1% for next year [11][13] - Recent results showed solid revenue growth and lower expenses, indicating a positive outlook for the company [12] Robinhood Markets Inc. (HOOD) - Robinhood operates a financial services platform that allows trading in various assets, including cryptocurrencies, and is expected to benefit from increased retail market participation [14][15] - The company has an expected revenue growth rate of 20.3% and earnings growth rate of 16.2% for next year, with a notable 9.7% improvement in the Zacks Consensus Estimate for earnings [16] Cboe Global Markets Inc. (CBOE) - CBOE anticipates growth in trading volume, which will drive transaction fees and organic growth, with an increased revenue growth target for 2025 set to low double digits to mid-teens [17][18] - The company has an expected revenue growth rate of 2.7% and earnings growth rate of 4.7% for next year, with a 3% improvement in the Zacks Consensus Estimate for earnings [19] Invesco Ltd. (IVZ) - Invesco's financial performance is bolstered by higher assets under management (AUM) and strategic expansion plans, with an expected revenue growth rate of 14.4% and earnings growth rate of 28.6% for next year [20][22] - Recent initiatives, including converting QQQ into an open-end ETF and establishing a joint venture in India, are expected to support revenue growth [21]

Core Viewpoint - Morgan Stanley defines 2026 as the "Year of Risk Reboot," expecting a shift in market focus from macro uncertainties to micro fundamentals, driven by a rare combination of fiscal, monetary, and regulatory policies alongside an AI investment cycle, leading to strong corporate earnings growth and a projected S&P 500 index rise to 7800 points, approximately 15% higher than current levels [1][3]. Policy Environment - The report highlights a unique "policy triumvirate" consisting of fiscal policy, monetary policy, and regulatory relaxation, which will work in a pro-cyclical manner, creating a favorable environment for risk assets [6][9]. - Fiscal policy is expected to provide significant corporate tax cuts amounting to $129 billion through the "One Big Beautiful Bill Act (OBBBA)" in 2026-27 [6]. - The Federal Reserve is anticipated to lower interest rates by 50 basis points in the first half of 2026, easing financial conditions [7]. - Regulatory relaxation will prioritize easing regulations, particularly in the energy and financial sectors [8]. AI Investment Cycle - AI-related capital expenditures are projected to be long-term and less affected by business cycle fluctuations, with an estimated total of nearly $3 trillion in data center-related capital expenditures, of which less than 20% has been deployed [11]. - A financing gap of up to $1.5 trillion is expected, necessitating various credit channels to fill this gap [12][14]. - The demand for high-quality credit products remains strong, but the significant supply pressure is likely to lead to a mild widening of credit spreads for investment-grade bonds [13]. Equity Market Outlook - Morgan Stanley predicts that the S&P 500 index will outperform other global markets, driven by strong earnings growth, AI-driven efficiency improvements, and a favorable policy environment [15]. - The forecast for S&P 500 earnings per share (EPS) is $272 for 2025 (12% growth), $317 for 2026 (17% growth), and $356 for 2027 (12% growth), supported by improved pricing power, AI efficiency, and stable interest rates [16]. Fixed Income Market - The U.S. Treasury yield curve is expected to experience significant "bull steepening" in the first half of 2026, with short-term rates declining sharply due to Fed rate cuts [23][24]. - The report anticipates a 60% increase in net issuance of U.S. investment-grade bonds, primarily driven by AI and data center financing needs, leading to wider credit spreads [30]. Commodity Market - Morgan Stanley favors metals over energy in the commodities sector, with gold being the top choice, setting a target price of $4500 per ounce, indicating a potential upside of about 9% [33]. - The supply of copper is expected to face challenges, leading to a projected price of $10,600 per ton in 2026 due to mining disruptions [36]. - The outlook for the energy market is less favorable, with Brent crude oil prices expected to remain around $60 per barrel due to weak demand and high non-OPEC supply [36].

Group 1 - Hema's former CEO Hou Yi's pet food brand "Paitexiansheng" is closing many stores and will launch a new online brand "Chongtiantian" to recover [1] - Nokia has signed a three-year agreement with Telecom Italia to expand and upgrade its 5G network coverage and capacity [1] - Morgan Stanley predicts that the European Central Bank will lower interest rates further in the first half of next year, with German bond yields expected to be around 2.45% by the end of 2026 [1] Group 2 - Panasonic has signed a share transfer agreement with YKK to sell 80% of its residential division, PHS, while retaining a 20% stake [2] - Google has committed to invest $2.25 million to modernize public data systems in Africa to prepare for the AI era [2] - XPeng Motors expects fourth-quarter deliveries to be between 125,000 and 132,000 vehicles, with revenue projected to increase by approximately 33.5% to 42.8% year-on-year [2] Group 3 - Alibaba International Station is launching AI Mode to help global SMEs automate cross-border e-commerce procurement processes [3] - Meituan Health and SF Express have announced a strategic partnership to establish a pharmaceutical e-commerce air logistics center in Ezhou, Hubei [4] - Bawang Tea Ji has celebrated its 8th anniversary, with cumulative sales of its product "Boya Juexian" exceeding 1.25 billion cups [5] Group 4 - TotalEnergies has agreed to acquire a 50% stake in EPH's flexible power generation platform in Western Europe for €5.1 billion [6] - Momenta and BMW have announced a partnership to develop a new generation of intelligent driving assistance solutions for the Chinese market, set to be produced in 2026 [6] - "Good Friends Technology" has completed a strategic financing round of 100 million yuan from Meihua Venture Capital to accelerate the application of its photon technology in mining [6] Group 5 - Digua Robot has formed a deep strategic partnership with Fourier to promote embodied intelligent interaction using the new domestic high-performance platform RDK S600 [7] - LG Energy plans to start producing lithium iron phosphate (LFP) batteries in South Korea by 2027, with an initial production capacity of 1 GWh [8] - Mercedes-Benz CEO Ola Källenius stated that the strict deadline for phasing out new combustion engine vehicles in Europe by 2035 is no longer feasible [8] Group 6 - Zhiyuan Robotics has developed its own robot operating system "Lingqu OS," which is set to be open-sourced by the end of this year [9] - In October, China's banks settled 15,194 billion yuan and sold 13,940 billion yuan in foreign exchange [10] - Indonesia plans to impose an export tax of 7.5% to 15% on gold products starting next year to encourage domestic processing [10]

Core Viewpoint - Morgan Stanley strategist Michael Wilson predicts a 16% rally for the S&P 500 Index over the next year, driven by strong corporate earnings, with a target of around 7,800 points by the end of 2026, indicating a fourth consecutive year of double-digit gains for the index [1]. Group 1: Earnings Expectations - S&P 500 earnings per share are expected to increase by 17% and 12% in the next two years, attributed to improved pricing power, efficiency from artificial intelligence, favorable tax and regulatory policies, and stable interest rates [2]. Group 2: Market Context - The S&P 500 has experienced significant gains, exceeding 20% in each of the previous two years, and is currently near all-time highs following better-than-expected third-quarter earnings [4]. - Despite the bullish outlook, there are concerns from other strategists, such as Goldman Sachs' Peter Oppenheimer, who anticipates US stocks will underperform international markets over the next decade due to high valuations [5]. Group 3: Historical Performance and Sentiment - Wilson maintained a bullish stance even during market downturns, successfully predicting a rebound as trade tensions eased under President Trump [3]. - Investor confidence in economic growth persists, despite concerns regarding high AI valuations and risks associated with the longest US government shutdown [4].

Core Viewpoint - Morgan Stanley forecasts that the US Dollar Index will decline to 94 in the first half of 2026, followed by a rebound to 99 by the end of the year [1] Summary by Categories - **Market Forecast** - The US Dollar Index is expected to drop to 94 in the first half of 2026 [1] - A recovery is anticipated, with the index projected to rise to 99 by the end of 2026 [1]

Core Viewpoint - Morgan Stanley strategists predict a rebound in U.S. Treasury bonds in the first half of 2026, with the Federal Reserve potentially implementing a 50 basis point rate cut [1] Group 1 - The 10-year U.S. Treasury yield is expected to decline to 3.75% by mid-next year, before rising to 4.05% in the fourth quarter [1] - For the entire year, the 10-year Treasury yield is anticipated to remain within a fluctuating range [1]

Group 1 - Morgan Stanley predicts that the performance of the US stock market in 2026 will outperform stocks in other regions of the world [1] - The rating for the US consumer discretionary sector has been upgraded from underweight to overweight [1] - The rating for the US healthcare sector has been upgraded from market weight to overweight [1]