Quantitative Equity Research: AI-Led Momentum in a Higher-Rate World: Stay Exposed, Get More Selective

Research evidence excerpt

Quantitative Equity Research: AI-Led Momentum in a Higher-Rate World: Stay Exposed, Get More Selective

Global Idea

May 22, 2026 01:38 PM GMT

Morgan Stanley & Co. International plc+MQuantitative Equity Research Ronald Ho, CFA

Quantitative Analyst

AI-Led Momentum in a Higher- Ronald.Ho@morganstanley.comMorgan Stanley India Company Private Limited+ +44 20 7425-2722

Rakhi Arora

Quantitative AnalystRate World: Stay Exposed, Get Rakhi.Arora@morganstanley.com +91 22 6996-2259

Morgan Stanley & Co. International plc+More Selective Stephan Heller

Higher yields have pressured crowded AI-led Momentum Stephan.Heller@morganstanley.com +44 20 7425-9753

winners, but resilient AI earnings, contained volatility and non- Morgan Stanley MUFG Securities Co., Ltd.+

Ukyo Haraguchi, CFA

extreme valuations support continued exposure. Stay invested, Quantitative Strategist

but get more selective, favouring earnings-supported Ukyo.Haraguchi@morganstanleymufg.com +81 3 6836-8925

Momentum. Morgan Stanley & Co. International plc+

Stephan M Kessler

Stephan.Kessler@morganstanley.com +44 20 7425-2854MA sharp bond market selloff, which accelerated following last week’s hotter-than-

QuantWise highlights research that incorporatesexpected inflation data, has driven U.S. yields higher and triggered a rapid rotation

a robust quantitative approach in ouracross equities. The move has translated into outsized factor returns, with

investment analysis.Momentum at the centre of the drawdown alongside weakness in Growth and AI-

Related reportlinked exposures. However, the recent adjustment does not look like a classic risk-

Quantitative Equity Research: Quant Matters –off episode or a wholesale defensive rotation. It is better characterised as a selective