A New Inflationary Regime?

Watch on YouTube ↗  |  January 27, 2026 at 21:19  |  6:09  |  Morgan Stanley
Speakers
Lisa Shalett — Chief Investment Officer, Morgan Stanley Wealth Management

Summary

Lisa Shalett, CIO of Morgan Stanley Wealth Management, argues that US inflation may be entering a higher-for-longer regime due to structural labor, housing, and energy bottlenecks, compounded by fiscal dominance. She recommends adapting portfolios by favoring pricing-power equities and active management, diversifying internationally and away from US dollar dependence, owning real assets, and managing fixed-income duration while focusing on high-quality credit.

  • Inflation remains near 3%, above the Fed's 2% target, and may be structurally higher for longer.
  • Labor shortages, housing undersupply, and energy bottlenecks are key persistent inflationary forces.
  • Fiscal dominance from high debt and deficits limits the Fed's inflation-fighting flexibility.
  • Portfolio implications include pricing-power equities, global diversification, real assets, and quality credit.
  • She expects higher volatility and changing cross-portfolio correlations.
Ideas
Lisa Shalett Chief Investment Officer, Morgan Stanley Wealth Management 5:03
Favor pricing-power equities.
In a higher-for-longer inflation regime, companies with pricing power should be favored within equities, and some active management is warranted because security selection and pricing-power dispersion matter more than in the prior low-inflation, low-rate passive era.
Pricing-power equities HIGH
Lisa Shalett Chief Investment Officer, Morgan Stanley Wealth Management 5:09
Diversify globally, reduce dollar reliance.
Investors should diversify globally and reduce reliance on the US dollar because relative-value opportunities are emerging in select international markets, while fiscal dominance, rising long-term Treasury term premiums, and a weaker dollar are inflationary and argue for less dollar dependence.
ACWX HIGH
Lisa Shalett Chief Investment Officer, Morgan Stanley Wealth Management 5:09
Diversify globally, reduce dollar reliance.
Investors should diversify globally and reduce reliance on the US dollar because relative-value opportunities are emerging in select international markets, while fiscal dominance, rising long-term Treasury term premiums, and a weaker dollar are inflationary and argue for less dollar dependence.
USD HIGH
Lisa Shalett Chief Investment Officer, Morgan Stanley Wealth Management 5:20
Own real assets as inflation hedges.
Own real assets such as infrastructure, commodities, and precious metals, which can hedge inflation and policy risk in a higher-for-longer inflation regime with fiscal dominance.
PAVE DBC GLTR HIGH
Lisa Shalett Chief Investment Officer, Morgan Stanley Wealth Management 5:31
Avoid duration, favor high-quality credit.
Be proactive in managing duration risk in fixed income and focus on the highest-quality credits, because higher-for-longer inflation and fiscal dominance threaten long-duration bonds and are likely to bring higher volatility and changing cross-portfolio correlations.
TLT HIGH
Lisa Shalett Chief Investment Officer, Morgan Stanley Wealth Management 5:31
Avoid duration, favor high-quality credit.
Be proactive in managing duration risk in fixed income and focus on the highest-quality credits, because higher-for-longer inflation and fiscal dominance threaten long-duration bonds and are likely to bring higher volatility and changing cross-portfolio correlations.
LQD HIGH
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This Morgan Stanley video, published January 27, 2026, features Lisa Shalett discussing Pricing-power equities, ACWX, USD, PAVE, DBC, GLTR, TLT, LQD. 6 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Lisa Shalett  · Tickers: Pricing-power equities, ACWX, USD, PAVE, DBC, GLTR, TLT, LQD