Morgan Stanley(US:MS)2025-07-01 00:40Investment Rating - The report recommends an overweight position in US equities, suggesting they remain attractive compared to the rest of the world [9]. Core Insights - There is a narrative questioning whether foreign investors are fleeing US assets, driven by uncertainties in trade and tariff policies. However, data indicates that while foreign investors have slowed their pace of buying US stocks, they have not significantly reallocated away from them [2][4]. - US risky and risk-free assets are viewed as attractive, with a recommendation for an equal-weight position in global equities while overweighting US equities due to better earnings revision breadth in the US compared to other regions [9]. - The report highlights persistent weakness in the US dollar over the next 12 months, driven by a convergence of US rates and growth to peers, alongside elevated policy uncertainty [10]. Summary by Sections - Investment Flows: International investors have been net buyers of US equities post-Liberation Day, but the buying pace has slowed compared to 2024, although it remains higher than in 2021-2023. US investors, in contrast, have been net sellers, reallocating away from US equities [3][4]. - Bond Funds: Net inflows to US bond funds have been positive but slower than the previous year. Foreign investors have remained net buyers of US bonds, indicating no significant outflows from US bonds [5][8]. - Regional Allocation: The weight of US equities in global equity funds has decreased, reflecting a market correction rather than net outflows. This change aligns with the overall market cap of US equities shrinking as a share of the global equity benchmark index [4].