Weak Dollar as a Safety Net for U.S. Stocks? Morgan Stanley Remains Bullish: The Quality Stock Cycle Isn’t Over

TradingKey - While major institutions have been advising against buying the dip in U.S. equities and continue to warn about the decline of American exceptionalism, Morgan Stanley analysts are bucking the trend, arguing that the weakening dollar is providing support for U.S. corporate earnings.

On Monday (April 28), Morgan Stanley analyst Michael Wilson released a report stating that earnings growth with lower volatility and high-quality U.S. companies are keeping them bullish on the U.S. stock market.

The analyst noted, "We remain in a late cycle backdrop where both quality and large-cap relative outperformance should continue."

Last week, following the easing of Trump’s tariffs and the subsiding of concerns over the Federal Reserve's independence, the S&P 500 rebounded by 4.60%, narrowing its year-to-date decline to 6%.

Nevertheless, trade policy uncertainty remains the top risk for investors. This uncertainty has already caused damage equivalent to a shift in global investment patterns, impacting both the dollar and Treasuries.

In contrast to Morgan Stanley’s optimistic outlook, Bank of America is advising investors to sell on rallies, while Société Générale recommends continuing to reduce exposure to dollar-denominated assets.