MIWOU0000PUS Overview

Market Outlook: Morgan Stanley remains cautious on U.S. equities but sees potential for growth driven by hopes for a China trade deal, favoring large-cap stocks and specific sectors like Healthcare and Industrials over Consumer Discretionary.

Earnings and Risks: While earnings results have exceeded expectations, risks such as corporate confidence deterioration and rising rates could impact future performance; the bank suggests that significant market highs may depend on a favorable trade agreement and Fed rate cuts, which are not anticipated this year.

US Equity Fund Inflows: US equity funds experienced their largest weekly inflows since March, totaling $55.8 billion, alongside a record $6 billion investment in crypto funds, indicating a significant shift from bonds to risk assets like stocks and cryptocurrencies.

Market Trends and Outflows: While US large-cap equities saw substantial inflows, emerging markets faced significant outflows of $7.5 billion, with Chinese equities experiencing record withdrawals; additionally, gold and utility funds also reported notable outflows.

Market Reactions to Trump Election Scenario: Citi strategists indicate that the continuation of "Trump trades" in financial markets is contingent on Donald Trump winning the upcoming election, with current market pricing reflecting this risk and showing a stronger US dollar and outperformance of US equities.

Potential Market Shifts Based on Election Outcome: Should Kamala Harris win, Citi predicts a reversal of typical Trump trades, leading to lower USD and yields, while underperforming global assets may see a rebound; they caution that the risk-reward balance for USD strength is no longer favorable without clearer signals of a Trump victory.