Why you should wait to BTFD

Morgan Stanley with the note. I agree.

With rates having adjusted, our focus now turns to growth. The Fire part of our narrative is in full gear with both nominal and real rates moving sharply higher so far this year. This is having a disproportionate impact on expensive growth stocks, as it should, but the real determinant of how long and deep this correction lasts will be growth. More specifically, we are laser focused on PMIs and earnings revisions, both of which are heading lower in our view. Software is a good case study and possible leading indicator in this regard for the broader market.

With the first part of our Fire and Ice narrative in full gear, we now turn our attention to the Ice. As already noted, growth is slowing and while most appreciate this dynamic, there is a lot of debate as to how much it will slow and whether it will matter for stocks. After all, growth is likely to remain positive but for some companies that remains to be seen given how difficult the comparisons are vs. last year especially in 1H 2022.

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