Michael Wilson, chief U.S. equity strategist at Morgan Stanley, pointed out that the current revaluation of U.S. stocks is based on the stock risk premium (ERP) channel, not interest rates, because given the speed of inflation and the Fed's changing response function, using current nominal or real interest rates to convert future cash flow could be a huge mistake.

In terms of rising stocks, Wilson has supported value stocks since mid-March.In Morgan Stanley's annual outlook, analysts advise investors to focus more on the defensive sectors of large-cap stocks rather than on growth sectors.This proposal is based on the following view: "the Fed and other central banks will begin to accelerate the withdrawal of easing, even if it does not have a tightening impact on the economy, it is bound to affect the market." "

Needless to say, given the much higher valuations of growth stocks, they will be more vulnerable to this tightening than defensive stocks.

Morgan Stanley strategists prefer defensive platesThink that policy tightening and the coming slowdown in economic growth may be worse than most people expected.The bank's two overweight sectors (health care and real estate investment trusts) have been doing well, and JPMorgan continues to be bullish on these two areas.

Wilson is still worried.The slowdown in economic growth will exceed most people's expectations.While Mr O'Micron is part of the market's concerns in the short term, Mr Wilson is more concerned about the risk of a rebound in supply, which could be superimposed by a gradual collapse in consumption. Consumer confidence remains at a declining level, mainly due to high inflation, which is expected to begin to show in consumption in the first quarter of next year.

Wilson concluded: "this is the beginning of the end of financial repression. Although it will take several years for the stock market to exit completely, as it did in the 1940s, we believe that the stock market will start discounting early through the equity risk premium. This is better for value stocks than growth stocks. "