Resist buying U.S. stocks and Treasurys, Morgan Stanley advises. Here's what their strategists recommend buying instead.

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Strategists at Morgan Stanley say investors should resist buying U.S. stocks as part of their 2022 preview, in which they argue that the 'hotter, faster'...

U.S. stocks have been a winning investment these last two years, on what proved to be a correct bet that corporate earnings would recover from the coronavirus pandemic, as well as the low interest rates and fiscal stimulus that have heated up the global economy.

“Good growth and moderating inflation would seem like another version of ‘Goldilocks’, and for some assets we think that the backdrop does look benign. But we think that 2022 is really about ‘mid-to-late cycle’ challenges: better growth squaring off against high valuations, tightening policy, rambunctious investor activity, and inflation being higher than most investors are used to,” said strategists led by Andrew Sheets.

U.S. stocks have much more elevated valuations and profitability to prepandemic levels, while also facing the largest expected rise in inflation-adjusted interest rates.

 

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