Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, suggests the recent volatility in US equities presents potential opportunities. She notes the “violent sector rotation” and “stock-performance dispersion” may highlight underlying value, particularly in the technology sector.
Shalett points out that while the capital intensity of the tech revolution is increasing, potentially impacting margins and free cash flow, current tech valuations are becoming attractive. The sector’s market premium is at a five-year low, and the software sell-off appears to be driven more by fear than concrete data. This overreaction, in her view, opens doors for discerning investors.
Despite acknowledging vulnerabilities, Shalett expresses openness to stock-picking, particularly where valuations suggest an underestimation of industry advantages and long enterprise-contracting cycles. She also observes that concerns about software exposure in private credit seem valid, prompting a necessary revaluation of smaller-scale and pre-GenAI software business models.
Finally, Shalett identifies mega-cap financials as a potentially fruitful area for stock-pickers. She believes that the growth opportunities in both revenue and earnings outweigh the potential risks associated with software direct lending and AI disruption. Morgan Stanley is a global financial services firm that provides investment banking, wealth management, and investment management services to a diverse range of clients. It helps individuals, institutions and governments manage their finances and achieve their financial goals.
