Morgan Stanley said three factors could derail U.S. equities during the summer, a period that has historically been one of the strongest seasons for stock performance.
According to Jin10, Andrew Sheets, Morgan Stanley’s head of global fixed income research, said the bank is closely watching three obstacles that could cause stocks to stumble.
The first risk is a renewed Iran conflict. Sheets said the U.S. Strategic Petroleum Reserve has fallen to a record low, and if the conflict escalates again, that could weaken the United States’ ability to respond to shocks.
The second risk is Federal Reserve rate hikes. Sheets said expectations that the Fed will keep interest rates unchanged through year-end are one of the key pillars supporting the current equity bull market. He said the risk is that this assumption could be wrong and that the mistake could become apparent quickly. He added that one view is that if the Fed is concerned about inflation, it should not delay action.
The third risk is a weakening outlook for AI capital expenditures. Sheets said second-quarter earnings reports could show a more cautious stance on spending, possibly because some companies that have invested heavily in AI have seen weak recent stock performance. He said that with current growth and earnings prospects closely tied to AI and investors favoring AI-related stocks, this situation could create risk.
STOCKS | Morgan Stanley: Three Risks Could End the U.S. Stock Market’s Summer Rally
2026-07-10 10:20:48
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