Morgan Stanley believes the current market sell-off is creating buckets of opportunities for investors who are looking to buy the dip.
In a new CNBC interview, Morgan Stanley Wealth Management CIO Lisa Shallet says fears around AI disruption are now being expressed in the market, as investors dump software and hyperscaler names.
Meanwhile, Shallet notes that some stocks in the AI trade are faring better, creating a divergence that traders can take advantage of.
“So, on some of the controversies that animated the first two months of the year, I think that a lot of that market action underneath the surface created huge amounts of dispersion. Some of it is not entirely logical. So we’re looking at some of the spreads between semiconductors being so highly valued and software being shunned and memory stocks being bid up and hyperscalers being sold. We think some of those extreme trades are really going to reverse themselves. So we’re seeing opportunities both long and short in this market.”
Shallet appears to be saying that investors should look into accumulating select software names and the Mag 7, while traders have the opportunity to short semiconductors and memory stocks.
The Morgan Stanley executive also says financials could do well on the back of expected regulatory reforms this year.
“Globally, systemically important banks, the capital markets banks, are looking at significant regulatory reform towards the end of the year. Our best guess is between changes to Basel endgame and G-SIB surcharges. You could see excess capital in these banks rising to $250-$275 billion that can be put to work in terms of share repurchases, additional deal underwriting, as well as just direct lending. Well, we did get those new rules yesterday.”
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