Tech stocks have a lower valuation than last year, says Morgan Stanley's Andrew Slimmon
Speakers
Andrew Slimmon
— Senior Portfolio Manager, Morgan Stanley Investment Management
Summary
Andrew Slimmon of Morgan Stanley Investment Management joined Squawk Box to discuss his 2026 playbook. He favors large technology stocks after a weak Q4 and financials due to deregulation and a valuation discount, while warning that industrials have already priced in Fed cuts. He also said AI-related capital-raising supply-demand is a tough question he would not base investment decisions on.
- Andrew Slimmon of Morgan Stanley Investment Management discussed his 2026 investing playbook.
- He favors large technology stocks after Q4 underperformance and lower starting valuations.
- He expects financials to benefit from deregulation, capital release, multiple expansion, and earnings growth.
- He is cautious on industrials after a strong run and says they have already priced in Fed cuts.
- He called AI-related capital raising and syndicate supply a tough question without a clear investment conclusion.
Ideas
Buy large tech after Q4 underperformance.
Large technology stocks and the Magnificent Seven underperformed in Q4 despite no sign of an earnings slowdown or fundamental problems. Their multiples start 2026 lower than they started 2025 while fundamentals remain intact, so he sees an opportunity in the weak Q4 performance and would not be surprised by a rotation back into these tech stocks in early 2026.
Industrials priced in Fed cuts; avoid.
Industrials have had a very strong run and appear to have already priced in Fed rate cuts. Their earnings now need to come through to support valuations, and he sees P/E compression risk in industrials, contrasting with large tech where earnings held up while stocks lagged.
Financials: deregulation and earnings drive upside.
Financials are an exception because they have performed well but still trade at roughly a 30% P/E discount to the market due to muscle memory from 2008. With regulation moving in the opposite direction, deregulation is releasing capital that can be deployed, and he expects multiple expansion plus earnings growth to continue driving these stocks in 2026.
