Morgan Stanley: The semiconductor pullback isn’t over yet, and capital is flowing into the consumer and transportation & logistics sectors

Deep Tide TechFlow message, according to Tide research, Morgan Stanley published its U.S. stock strategy weekly report on July 20. The report said the trend of market momentum spreading is still ongoing, and the risk of momentum trading in the semiconductor sector has not been fully released. Silver-stock price analog models indicate that semiconductors may still have about 15% room to fall in the short term, and the breadth of earnings revisions has retreated from historical extreme levels. Over the past two months, consumer durables and transportation sectors have each outperformed the S&P 500 by about 12 percentage points, and the equal-weight index has continued to beat the market-cap-weighted index.

In terms of allocation, Morgan Stanley continues to recommend overweight cloud providers (Microsoft, Google, Meta, Amazon) within the technology sector and underweight semiconductors. The four big tech firms’ equal-weight price-to-earnings multiples have fallen back to 21x. Consumer durables and transportation are the clearest directions for inflows of capital; transportation’s earnings revision breadth has reached the strongest level since 2021. Market style is gradually shifting toward high-quality factors, and the earnings revision breadth of high gross-margin and high sales-stability factors continues to strengthen. The S&P 500 year-end target is 8000 points, with 7000 as a key technical support level.