Michael Zezas

Episodic risk from funding fights such as debt ceiling extensions could drive risk-off rallies in U.S. Treasury notes and bonds, as per Morgan Stanley rate strategists.

Japan is well-positioned to benefit from the Asia CapEx supercycle driven by supply chain rewiring, defense spending, and AI infrastructure, combined with structural corporate reforms and an improving macro environment where deflation is behind. Additionally, a potential reallocation of household savings from deposits to equities could drive meaningful upside. The Morgan Stanley strategists expect double-digit returns in Japanese equities this year.

In a de-escalation scenario that returns conditions to the status quo ante, US equities should rally meaningfully. Half the Russell 3000 is already down over 20%, and substantial multiple compression has occurred, so a snapback is possible. The Morgan Stanley equity strategy team sees a price target for substantial returns on a 12-month basis in that scenario.