Morgan Stanley cuts global equities, boosts cash and US Treasuries

Core Viewpoint - Morgan Stanley has adopted a defensive investment strategy by downgrading global equities and upgrading cash and US Treasuries due to rising oil supply risks from the Middle East conflict [1][2]. Group 1: Investment Strategy Changes - The bank lowered its rating on global equities to equal weight from overweight and increased its allocation to cash and Treasuries to overweight from equal weight, citing "asymmetric outcomes" for risk assets in a high crude price environment [2]. - Morgan Stanley's strategists cut exposure to US and Japanese stocks, moving both to equal weight from overweight, while still favoring American equities for their stronger earnings growth outlook [4]. Group 2: Oil Price Impact - Brent crude oil prices surged 59% in March, reaching over $116 per barrel, marking the steepest rise since the 1990 Gulf War [3]. - The bank warned that if oil prices remain between $150 and $180 per barrel, global equity valuations could decline by as much as 25% [3]. Group 3: Market Behavior and Trends - There has been a notable shift in investor behavior, with flows back into US equities and bonds accelerating as investors seek safety in dollar assets amid the ongoing conflict [5]. - The current strategy reflects a growing caution across markets, emphasizing liquidity and high-grade duration as key focuses [8].