Morgan Stanley believes now is a good opportunity to profit from the closure of US stocks. It is currently recommended to reduce holdings in three specific sectors.

Lisa Shalett, Chief Investment Officer of Morgan Stanley's Wealth Management Division, is convinced that now is a good opportunity to take profits in the US stock market. The bank's analysis team clearly indicates that they believe it is advisable to reduce holdings in three specific sectors of US stocks: small and mid-cap stocks, non-profitable tech companies, and popular internet stocks. Shalett stated that although small-cap stocks have been performing well, investors would be wise to follow the lead of many hedge funds and exit immediately. She believes that the momentum driving the market higher may continue in the short term, but the market environment next year is likely to deteriorate significantly, especially for small-cap companies. "We believe that the profitability and public market performance of small-cap stocks are indeed inferior to those in the private market," she said. Another major concern raised by Shalett is that small-cap companies may not have the resources to compete at a technological level with larger competitors. "They may not be able to invest in cutting-edge technologies like artificial intelligence and compete like their larger peers," she added. Despite market expectations of a Fed rate cut in September driving stock prices higher recently, Shalett believes that this is not enough to sustain support for small-cap stocks. "They would need a rate cut much larger than 100 basis points, and we may not receive enough policy support," she stated.