Morgan Stanley analysts note that although there are signs of market participants pricing in a Trump victory, the price increases are not significant across most sectors, except for financial stocks. Additionally, financial stocks have benefited from a robust earnings season beyond the political speculations.
Morgan Stanley's chief U.S. equity strategist, Mike Wilson, emphasized that the expectation of a Trump victory is not fully priced into U.S. stocks. He pointed out that the surge in Bitcoin prices, the plunge in the Mexican peso, the rise in U.S. Treasury yields, and the strong performance of financial and industrial stocks are indicators, but only financial stocks have shown notable gains.
Within major sectors, financial stocks have exceeded earnings expectations by the largest margin, and their sales have surpassed forecasts, ranking second. Wilson believes that fundamental drivers have a more significant impact on financial stocks than election outcomes. He suggests that in the future, this influence will continue to outweigh political factors.
Wilson is skeptical about whether sectors like tariff-sensitive consumer stocks or renewable energy stocks would rebound if Trump secures a victory, given that his win isn't fully priced in. He notes that since 2016, the economic cycle has matured, and the implications of inflation are more pronounced. He recalls that in 2016, the inflation impact on consumers was different, and the risk of rising bond markets due to deficit expansion was not as significant as it is now.
