Morgan Stanley with a sensible note. I don’t agree with all of the allocations. Especially materials which I argue should be underweight as China slows fast but it’s still a solid framework:
We’re entering mid-cycle faster than normal. Rate of change on growth & policy has peaked, and valuation is falling. Taxes, tapering & transitions temper index returns. Look for alpha in relative value, themes, and reasonably priced growth and cyclicals as mid-cycle transition runs its course.
Mid-cycle is here, and with it comes a transition from early cycle leadership. This recession and recovery is unique for a number of reasons, not the least of which is its velocity, down and up. The rapid recovery has us entering a mid-cycle environment only 1 year in, and market internals are reflecting that—corrections in ultra high growth, small caps, low quality, and early cycle groups like Semis are sending a powerful message about the durability of COVID-economy gains and the next stage for the expansion.
