Morgan Stanley said its global market stress and sentiment indicator has turned positive, signaling a shift to a “risk on” appetite after holding a neutral reading since January. According to the bank’s Tuesday note, this regime has historically been linked to above-average one-week returns for global equities.
The MSI generates risk-on/risk-off signals based on two key conditions: the “level” and the “change” in the MSI. Strategists note that both conditions are currently met. U.S. stock indexes rose on Tuesday, reaching a nearly two-week high, as softer producer price data bolstered expectations for a potential interest rate cut by the Federal Reserve in September.
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