Morgan Stanley Sees U.S. Quality Stocks Outperforming If Fed Hikes This Week

Morgan Stanley strategists said on September 14 that if the Federal Reserve raises rates as expected this week, U.S. high-quality stocks could outperform the broader market. The team led by Michael Wilson said historical data show quality stocks usually do better after the first rate hike in a tightening cycle, while cyclical and momentum stocks also tend to outperform, according to Jiemian News. Morgan Stanley said the main driver of higher rates now is strong economic growth, rather than worsening fiscal sustainability or an unexpected jump in inflation. The team warned that if the Strait of Hormuz remains closed and oil prices accelerate sharply, triggering an inflation shock, the current mildly “pre-emptive” policy adjustment could turn into a more prolonged rate-hike cycle.