Key Takeaways Please add me to your distribution list. M Idea Morgan Stanley & Co. LLC Matthew Hornbach Strategist Matthew.Hornbach@morganstanley.com +1 212 761-1837 Martin W Tobias, CFA Strategist Martin.Tobias@morganstanley.com +1 212 761-6076 Shaun Zhou Strategist Shaun.Zhou@morganstanley.com +1 212 761-3348 Aryaman Singh Strategist Aryaman@morganstanley.com +1 212 761-1993 Eli P Carter Strategist Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, ...

Tell us about demand destruction. I'm reading about that a lot these days. Uh which is not something you want necessarily.Uh what are the risks of that and at what point might we start seeing demand destruction given what's going on particularly with the energy markets. >> You're going to start seeing uh responses pretty quickly to uh higher energy prices uh uh in consumer spending because of the uncertainty about the future macro environment and business investment. If that's relatively short, if we're tal ...

Ministry of Finance, Bloomberg calculations China’s government spending got off to its fastest start to any year since 2022, likely an effort by authorities to fortify the economy in the face of rising external uncertainty. A broad measure of public expenditure climbed 6% in the January-February period this year from 2025, according to Bloomberg calculations based on Ministry of Finance data released Thursday. Most Read from Bloomberg In contrast, broad fiscal revenue fell 1.4%, leaving a deficit of o ...

Core Insights - Bitcoin's structure leads to disproportionate reactions during geopolitical shocks, as it trades 24/7 and absorbs selling pressure that would otherwise be spread across multiple markets [1] - Unlike gold, Bitcoin lacks institutional trust, making it less appealing during crises when investors prefer to buy gold and sell risk [2] - Bitcoin's performance is closely tied to oil price movements, with significant sell-offs occurring in both oil crashes and surges, but for different reasons [5] Market Dynamics - High oil prices above $100 lead to persistent inflation and elevated interest rates, making Bitcoin unattractive as a speculative asset [4] - Bitcoin's price fell from a pre-war high of $69,000 to below $18,000 during the 2022 oil surge, illustrating its vulnerability to oil price dynamics [4] - In contrast, during the COVID oil crash, Bitcoin fell 50% in less than a month as it was the only large liquid market available [5] Current Market Situation - As of March 2026, Bitcoin is trading around $70,000, down 45% from its October 2025 all-time high of $126,000, indicating it entered the current crisis in a bear market [7] - The starting point for Bitcoin's current situation is a crash from its highest nominal price, which complicates recovery due to the need to regain institutional trust [8] Recovery Timeline - Historical patterns suggest recovery timelines depend on oil stabilization, with potential recovery beginning by late 2026 if oil prices retreat [12] - If the conflict extends and oil remains elevated, recovery could be delayed until 2028, compressing the crypto cycle [13] - Past recoveries from significant crashes have shown that Bitcoin often experiences substantial rallies following macro-driven downturns [14] Future Outlook - The potential upside for Bitcoin post-oil stabilization could see it reclaiming $100,000, with further growth towards $150,000-$180,000 in the following 18-24 months [16] - The macro environment driven by fiscal spending related to geopolitical conflicts could enhance Bitcoin's scarcity narrative, leading to increased demand [15] - The key question for investors is not whether Bitcoin will recover, but whether they have the conviction and liquidity to hold through the interim volatility [18]

Core Insights - The rise in oil prices, currently at $88.20, represents a significant increase of over $20 per barrel since before the U.S.-Iran war, potentially leading to an additional $150 billion in consumer spending at the pump [1][2] - The individual tax cuts from the "big beautiful bill" amount to $129 billion for 2025, but the benefits may be offset by elevated oil prices, which could negate the fiscal advantages for consumers [3][7] - Analysts suggest that if oil prices remain high, the anticipated economic boost from tax refunds may be redirected towards energy costs, undermining consumer spending [8] Economic Impact - The total consumer spending on gasoline in Q4 2025 was over $420 billion, and any increase in oil prices could significantly impact this figure [2] - The fiscal stimulus from the tax law was expected to enhance economic growth in 2026, but the current oil price shock is occurring just as consumers are set to receive tax refunds [7] - Historical data indicates that it took about six months for oil prices to stabilize after previous surges, suggesting a prolonged period of elevated prices could have lasting effects [6] Market Reactions - Some analysts believe that the economic environment today is different from previous oil price surges, with lower core inflation and reduced job growth compared to past crises [10] - There is a divergence in opinions among analysts regarding the resilience of consumer spending in the face of rising oil prices, with some expressing confidence based on past performance during similar conditions [9]

Core Thesis - Coinbase Global, Inc. is viewed positively due to its structural advantages and potential for growth despite recent sell-offs in the crypto market [1][2][4] Company Overview - Coinbase operates a platform for crypto assets both in the U.S. and internationally, with its shares trading at $164.32 as of February 13th [1][2] - The company has seen a significant decline of approximately 43% in 2025, largely reflecting the downturn in Bitcoin prices [2] Competitive Advantages - Coinbase serves as the primary custodian for over 80% of U.S. spot Bitcoin and Ethereum ETFs, which enhances its competitive position and creates institutional lock-in [2] - The company is expanding its higher-margin recurring revenue streams through staking, subscription services, and Layer-2 ecosystem initiatives, which contribute to earnings durability [3] Market Outlook - The investment thesis is supported by expectations of improved macro liquidity conditions, with anticipated interest rate cuts from the Federal Reserve and potential fiscal stimulus in the second half of 2026 [3] - This environment is historically favorable for crypto assets and trading activity, suggesting a positive outlook for Coinbase [3] Valuation and Risk-Reward Profile - Coinbase is characterized as a high-quality growth company with an upside target near $350, supported by analyst estimates from firms like Goldman Sachs and Rosenblatt Securities [4] - The downside risk appears limited based on technical support, creating an attractive risk-reward profile for investors [4] - The combination of institutional positioning, improving liquidity expectations, and a depressed valuation presents a tactical entry point for investment [4]

Core Viewpoint - The yen has experienced a modest decline following the Liberal Democratic Party's (LDP) significant electoral victory, which may lead to increased fiscal stimulus under Prime Minister Sanae Takaichi [1][2]. Currency Movement - The yen dropped 0.3% to 157.62 per dollar, marking its weakest level in over two weeks [2]. - The LDP secured a two-thirds super majority in the 465-seat lower house, the highest proportion of representatives for any party in post-war Japan [2]. Fiscal Policy Implications - Concerns regarding Japan's fiscal spending have intensified, particularly after Takaichi's announcement of a temporary sales tax cut on food, raising fears about the country's debt levels [3]. - A decisive electoral victory is expected to bolster expectations for proactive fiscal policy, which may encourage short-term selling of the yen [4]. Market Reactions - Further declines in the yen could approach levels where Japanese authorities previously intervened, with traders monitoring the 159.45 per dollar mark reached in mid-January [5]. - Japanese officials are more focused on currency volatility and the pace of movements rather than specific exchange rate levels [5]. Monetary Policy Expectations - Persistent weakness in the yen is influencing expectations for the Bank of Japan's policy, with increasing speculation about a potential rate hike by April [6]. - The yen's recent decline has been exacerbated by comments from Takaichi, suggesting that a weaker currency could benefit export industries [7]. Intervention Speculations - Analysts anticipate rising verbal interventions as the USD/JPY approaches 159, with actual intervention likely to occur closer to 162 [8].

The yen was little changed after Japan’s ruling Liberal Democratic Party won an outright majority in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi https://t.co/7vyIVrKLz6 ...

Core Viewpoint - Woodward Inc. has seen its shares rally to an all-time high following a strong earnings report, indicating robust performance in the aerospace and industrial sectors [1][6]. Company Overview - Woodward Inc. is a long-established company founded around 1870, specializing in manufacturing components for the aerospace and industrial sectors, including energy control equipment and parts for electricity turbines [4]. - The company serves a diverse range of customers, including major players in the aerospace industry such as Rolls-Royce, Boeing, and RTX, as well as sectors like defense, marine, transportation, and oil and gas [5]. Financial Performance - The company reported earnings per share (EPS) of $2.17, significantly surpassing the estimated $1.65, with total sales reaching $996 million compared to an estimate of $893 million, marking a 29% year-over-year increase [6][9]. - Sales in the industrial segment increased by 30%, while aerospace sales rose by 29%, reflecting strong market demand [7]. - Woodward has raised its earnings guidance for fiscal year 2026, with the higher end of the EPS range increasing from $8.00 to $8.60, representing a 7.5% increase [8]. Market Position and Growth Drivers - The company is well-positioned within the energy, aerospace, and industrial sectors, which continue to outperform in the current economic climate [2][3]. - Analysts have adjusted their earnings estimates upward, with Deutsche Bank setting a target of $430, UBS at $417, and Truist at $390, indicating positive market sentiment [15]. Margin and Scalability - Woodward's gross margins are around 27%, with net interest margins improving by approximately 300 basis points over the last five years, suggesting enhanced scalability and net income growth [10][11].

Economic Outlook - The economy is perceived to be strong, with expectations of significant demand due to recent tax cuts taking effect this year [4] - Predictions for GDP growth in Q1 and Q2 range between 3% to 4%, with some estimates suggesting up to 4% growth due to substantial fiscal and monetary stimulus [9][10] - The Federal Reserve is not expected to change interest rates in the near term, indicating a continuation of current economic policies [3] Fiscal and Monetary Policy - The Federal Reserve has re-engaged in quantitative easing at a rate of $40 billion per month, contributing to a stimulative economic environment [5] - There is pressure for further stimulus in an election year, which may influence economic policies and growth [5] - Real interest rates are currently below 1%, suggesting a highly accommodative monetary policy [5] Inflation Concerns - Inflation is anticipated to rise following the election, influenced by ongoing fiscal stimulus unless measures are taken to mitigate it [11] - The relationship between high growth rates and inflation is acknowledged, with concerns that inflation may follow economic growth more slowly but could become challenging to control once it accelerates [11]