Morgan Stanley: U.S. Market Rally May Shift to Broader Cyclical Sectors

Huoxing Finance reports that on June 15, Morgan Stanley stated that the structure of the U.S. stock market rally may be shifting, with capital potentially flowing from overvalued technology sectors to a broader range of cyclical industries. The strategy team led by Michael Wilson noted that as geopolitical risks ease, oil prices decline, and pressures on interest rates and the dollar subside, the market environment is gradually becoming more favorable for economically sensitive assets, creating potential catch-up opportunities for sectors that have lagged behind. The report suggests that while previous U.S. market gains were concentrated in technology stocks, cyclical sectors—including discretionary consumer goods, transportation, and regional banks—remain underweighted overall, leaving room for capital inflows. Recent expectations of easing U.S.-Iran tensions and improved transit conditions in the Strait of Hormuz have also boosted market risk appetite. Karen Ward, European strategist at J.P. Morgan Asset Management, similarly highlighted that falling oil prices could serve as a key support for equities and may encourage global central banks to further adopt accommodative policies; she expects oil prices to briefly decline to around $70 per barrel. Additionally, the Deutsche Bank strategy team believes that the long-term relative advantage of U.S. equities may weaken, making European markets—where cyclical stocks constitute a larger share—relatively more attractive. Overall, institutions generally agree that if geopolitical risks continue to ease alongside declining inflation, the U.S. stock market could transition from a “technology-driven structural rally” to a “more balanced rotation among cyclical sectors.”