The S&P 500 has gained nearly 13% this year, but Morgan Stanley strategists say that rally hides a much weaker stock market underneath, with more than half of Russell 3000 stocks down more than 20% since June. The bank's note, published Monday, points to industrials such as Caterpillar as the best risk-reward trade now that the average stock has taken a beating.
The S&P 500 has climbed nearly 13% this year, yet more than half of Russell 3000 stocks have fallen more than 20% since June, Morgan Stanley strategists said. That gap between the index's headline gain and the broader market's slide is what the bank now frames as a buying opportunity.
Chief U.S. equity strategist Mike Wilson and his team, in a note published Monday, said they continue to favor quality stocks. But the strategists added that the price damage spread across the average stock has created a better setup for cyclical areas where fundamentals remain intact, and that industrials now offer the best risk-reward.
Morgan Stanley strategists pointed to Caterpillar as one such opportunity among industrials. Caterpillar shares were up 2.31%.
Source: MarketWatch.com – Top Stories (snippet-based)
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