Morgan Stanley cuts global equities, boosts cash and US Treasuries
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Morgan Stanley shifts to a defensive stance, downgrading global equities to equal weight from overweight and upgrading cash and US Treasuries to overweight, citing Middle East oil supply risk after Brent crude surged 59% this month and briefly topped $116/barrel; warns oil at $150–$180/bbl could cut global equity valuations by up to 25%. Regional changes: US and Japan moved to equal weight from overweight (US still favored for earnings); highlights supply‑chain and Strait of Hormuz disruption risks and a return of safe‑haven flows into US dollar assets and Treasuries. Market and crypto implications: the repricing toward liquidity and high‑grade duration increases downside risk for risk assets — including crypto, DeFi and token markets on DEXs/CEXs — likely raising volatility, slowing fundraising and adoption until the oil shock eases.
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Morgan Stanley has adopted a more defensive stance, downgrading global equities and upgrading cash and US government bonds amid rising oil supply risks from the Middle East conflict, Reuters reported.
The bank lowered global equities to equal weight from overweight and lifted cash and Treasuries to overweight from equal weight, citing “asymmetric outcomes” for risk assets in an environment of surging crude prices.
Oil’s surge spurs caution
Brent crude has surged 59% this month—its steepest rise since the 1990 Gulf War—briefly topping $116 a barrel on Monday.
Morgan Stanley said the magnitude and duration of supply disruptions remain uncertain, making risk assets vulnerable to sharp losses.
If oil prices stay between $150 and $180 per barrel, global equity valuations could shrink by as much as 25%, the bank warned.
Regional downgrades highlight risk reset
The strategists cut exposure to US and Japanese stocks, moving both to equal weight from overweight, though they still favour American equities for their stronger earnings growth outlook.
On Japan, Morgan Stanley noted potential downside from supply chain disruptions and global recession risks should the Strait of Hormuz remain closed for an extended period.
Safe-haven flows return to US markets
The shift marks a reversal from last year, when investors favoured Europe and emerging markets amid trade tensions. Since the latest conflict erupted, flows back into US equities and bonds have accelerated as investors again seek safety in dollar assets.
Morgan Stanley said Treasuries provide better diversification during an oil shock because the U.S. is less dependent on imports than Europe.
Strategy underscores risk repricing
The bank’s move underscores how fast a global energy shock can reshape portfolio allocations. Its focus on liquidity and high-grade duration reflects growing caution across markets.
For investors, the key variable now is the path of crude—and how long supply disruptions persist—before the current defensive tilt can ease.
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