This Morgan Stanley podcast episode focuses on equity market analysis in the context of rising interest rates and weakening earnings revisions. Mike Wilson, the Morgan Stanley CIO, discusses how 10-year Treasury yields exceeding 4.5% negatively impact equity valuations, shifting the primary driver of returns from valuations to earnings. He highlights a shift in strategy towards sector and factor selection, favoring areas with strong earnings revisions like financials and software, while maintaining a preference for large-cap quality stocks. The impact of potential tariffs and government policy changes on earnings is also analyzed, suggesting a potential 5-7% EPS reduction for the S&P 500 if tariffs are imposed. The podcast concludes by emphasizing the importance of stock selection over simply adding beta to a portfolio given the current market conditions.
