Morgan Stanley Downgrades Technology Sector to Equal-weight, Upgrades Utilities Sector to Overweight

February 5, 2018 7:34 AM EST
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Morgan Stanley Downgrades Technology Sector to Equal-weight, Upgrades Utilities Sector to Overweight.

Analyst Mike Wilson comments on tech sector downgrade "...., we think it may be a combination of both and we expect this correction in the cyclical / defensive ratio to continue in the near term. Ultimately, we expect this ratio to resume its uptrend but we've come a long way and many investors are now positioned for it to continue. It needs to rest, particularly with economic surprises now falling."

The analyst also comments on utilities saying his upgrade is based on the following three points:

  1. We are not believers in the sustainability in the rapid ascent of yields and think that some retracement of recent rate moves, or just a slowing in the ascent, will favor Utilities.
  2. We are not believers in the sustainability in the rapid ascent of yields and think that some retracement of recent rate moves, or just a slowing in the ascent, will favor Utilities.
  3. Upgrading Utilities may seem misplaced in a world that is now preoccupied with rising interest rates. However, based on recent underperformance, Utilities may be one of the sectors that is properly priced for higher rates.


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