Morgan Stanley strategists say higher-risk stocks should be bought in October.

Morgan Stanley said that if bond market volatility fails to subside, market breadth and index prices will converge by the middle of next month, which would be a good opportunity to buy higher-risk stocks. The strategist team led by Michael Wilson remains bullish on large-cap quality stocks, especially asset-light companies with upward earnings revisions. The team said that if bond volatility subsides earlier, market breadth will likely move toward index prices, driving both higher in tandem in the short term. The strategists noted that the market is not taking various risks lightly, including rising energy prices, tighter Federal Reserve policy, and geopolitical turmoil. Since June, more than half of the stocks in the Russell 3000 index have fallen at least 20%, and the S&P 500's price-to-earnings ratio has dropped to 19 times, close to its March low.