By Sam Boughedda
Morgan Stanley’s Michael Wilson told Bloomberg TV on Monday that companies will have to aggressively lower expenses before he becomes more optimistic on U.S. equities.
The Morgan Stanley Chief U.S. Equity Strategist and Chief Investment Officer stated that when the layoff cycle “picks up in earnest,” it will actually be one of the keys for them to get bullish as it means “the bleeding will stop on the operating leverage.”
Various tech firms have announced job cuts this year, with reports stating Meta Platforms Inc (NASDAQ:META) is expected to cut thousands of jobs this week. In addition, ride-hailing firm Lyft (NASDAQ:LYFT) said last week that it would be laying off approximately 13% of its workforce.
However, Wilson, who correctly predicted the downturn this year, does not believe the tech sector is dead, and he sees a possible leadership change occurring next year when the U.S. economy expands. The Morgan Stanley strategy said plenty of tech stocks will be fine and there are many great opportunities in single stocks.
“The reality is there are too many of them, and they got overvalued. So it’s not that technology is dead in terms of the spending trend, we are very bullish on technology spending,” Wilson stated.
He added that investors need to try to figure out what outperforms in the last leg down because that will tell you what is going to outperform in the next leg up. “That’s been industrials, financials and some of the commodity complex, and that makes perfect sense,” he continued.