LIVE MARKETS-"Run it hot" takes a detour to ensure it reaches its destination - MS

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"RUN IT HOT" TAKES A DETOUR TO ENSURE IT REACHES ITS DESTINATION - MS

Morgan Stanley says the U.S. administration’s “run it hot” economic strategy has hit a temporary detour, but the overall path remains intact.

The bank argues that President Trump’s nomination of Kevin Warsh as the next Fed Chair is best seen as a market-stabilising intervention after a “parabolic” surge in precious metals and a disorderly slide in the dollar.

Warsh’s reputation as a balance‑sheet hawk appears to have restored confidence quickly - the S&P 500/gold ratio recorded one of its biggest single-day jumps in history, a signal the market welcomed the move, according to Morgan Stanley.

Near-term, the strategists expect further upside in the equity-to-gold relationship if gold continues to retreat on tighter‑liquidity expectations.

Longer-term progress, they say, hinges on productivity gains tied to a broader capex cycle and AI‑related investment.

The bank also anticipates a rotation from commodity cyclicals back toward consumer cyclicals in the near to intermediate term.

"In particular, we see the recent pullback in Consumer Discretionary Goods as an opportunity to add exposure to the space...as unit demand and pricing are improving off of low levels, earnings revisions momentum continues, household balance sheets remain strong in aggregate."

(Joel Jose)

EARLIER ON LIVE MARKETS:

US STOCKS EDGE UP IN EARLY TRADE BUT COMMODITY WEAKNESS CONTINUES - CLICK HERE

DIVIDENDS BOLT OUT OF THE GATE, WHILE GROWTH IS THE GLUE - CLICK HERE

DRIVERS BEHIND GOLD RALLY STILL POWERFUL DESPITE PULLBACK - BARCLAYS CLICK HERE

WHY A FED UNDER WARSH MAY BE TOO HAWKISH CLICK HERE

EUROPEAN SOFTWARE: WHEN FEAR CLOUDS FUNDAMENTALS CLICK HERE

DEFENSIVES HELP STOXX LIMIT THE DAMAGE CLICK HERE

BEFORE THE BELL: FUTURES FALL AS METAL ROUT HITS MINERS CLICK HERE

METALS GET A LOT LESS PRECIOUS AS POSITIONS SQUEEZED CLICK HERE