Morgan Stanley Warning: U.S. Stocks May Struggle to Reach New Highs as Investors Rotate Away from Tech Stocks

BlockBeats News, July 6th. A Morgan Stanley strategist believes that as investors withdraw from this year's best-performing tech stocks and rotate into other sectors, the US stock market may face resistance in reaching new all-time highs. This rotation may weaken the market's previous rally led by AI and mega-cap tech stocks.

The analysis points out that most of the current positive economic and earnings news has already been priced in by the market, causing the index performance to stagnate. The market now requires truly outstanding positive news to continue rising. Investors are eager to see solid evidence that the massive AI capital expenditure can translate into sustainable returns, rather than just continuously expanding spending figures. This uncertainty is driving more funds to shift from mega-cap tech stocks to a broader range of stocks.

Morgan Stanley suggests that investors should focus more on the profitability feasibility and quality, take partial profits in small-cap stocks, and increase their allocation to beneficiaries of AI applications in certain sectors. Previous research by the bank also indicated that despite strong third-quarter performance, large-cap tech stocks have significantly lagged in stock price gains, leading to a decrease in valuation. This contrasts sharply with the rise in industrial and cyclical sectors due to rate cut expectations, serving as further evidence of a changing market fund structure.