Buzzberg Cup Live

3 Things That Could Break the Summer Rally

Watch on YouTube ↗  |  July 08, 2026 at 22:19  |  4:16  |  Morgan Stanley
Speakers
Andrew Sheets — Chief Cross-Asset Strategist, Morgan Stanley

Summary

Andrew Sheets outlines three potential disruptors to the summer market rally: an unexpected Fed rate hike, a pullback in AI infrastructure spending by large tech firms, and a reignition of the Iran conflict. He also reiterates a base case of equities outperforming credit amid rising corporate aggression.

  • Equities may outperform credit as corporate aggression increases, similar to 1997-98 and 2005-06 periods.
  • July historically delivers strong S&P 500 and high-yield returns, but seasonality is not a standalone strategy.
  • Risk 1: A surprise Fed rate hike on July 29 could spark market volatility.
  • Risk 2: Large US tech companies may reduce AI capex plans in upcoming earnings, threatening AI-driven growth optimism.
  • Risk 3: Renewed Iran hostilities and depleted US strategic petroleum reserves could lift oil prices and disrupt markets.
Ideas
Andrew Sheets Chief Cross-Asset Strategist, Morgan Stanley 0:31
Equities to outperform credit amid corporate aggression
Current conditions resemble 1997-98 or 2005-06 when corporate aggression was increasing and had further to go, leading to equities outperforming credit. This supports a relative preference for equities over credit.
SPY MED
Andrew Sheets Chief Cross-Asset Strategist, Morgan Stanley 0:31
Equities to outperform credit amid corporate aggression
Current conditions resemble 1997-98 or 2005-06 when corporate aggression was increasing and had further to go, leading to equities outperforming credit. This supports a relative preference for equities over credit.
HYG MED
Andrew Sheets Chief Cross-Asset Strategist, Morgan Stanley 1:51
Monitor tech earnings for AI capex cuts
Second-quarter earnings for large US tech companies will be a key focus. The risk is that these companies show hesitation to spend on AI infrastructure, potentially because their share prices have underperformed. A reduction in AI capex plans would undermine confidence in AI-driven growth and disrupt the rally given high investor AI exposure.
Large US tech companies MED
Andrew Sheets Chief Cross-Asset Strategist, Morgan Stanley 3:00
Iran conflict could spike oil prices
There are reports of renewed hostilities and a fragile ceasefire involving Iran. The US strategic petroleum reserve is at its lowest ever, reducing the ability to absorb shocks. An escalation of the conflict could disrupt oil flows through the Strait of Hormuz and cause a spike in Brent oil prices, posing a risk to markets.
BNO MED
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This Morgan Stanley video, published July 08, 2026, features Andrew Sheets discussing SPY, HYG, Large US tech companies, BNO. 4 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Andrew Sheets  · Tickers: SPY, HYG, Large US tech companies, BNO