US Equity Strategy: Weekly Warm-up: A Healthy Reset

Research evidence excerpt

US Equity Strategy: Weekly Warm-up: A Healthy Reset

Idea

June 8, 2026 04:36 AM GMT

Morgan Stanley & Co. LLCMUS Equity Strategy | North America Michael J Wilson

Equity Strategist

Weekly Warm-up: A Healthy M.Wilson@morganstanley.comAndrew B Pauker +1 212 761-2532

Andrew.Pauker@morganstanley.com +1 212 761-1330

Reset Michelle M. Weaver, CFA

Michelle.M.Weaver@morganstanley.com +1 212 296-5254

While Friday’s positioning-driven sell-off was notable, earnings Diane Ding, Ph.D.

and macro data remain strong and supportive of broader QuantitativeQian.Ding@morganstanley.comStrategist +1 212 761-6758

participation over the coming months. Rates and rate volatility Nicholas Lentini, CFA

remain a near-term risk, contingent on inflation data as well as EquityNick.Lentini@morganstanley.comStrategist +1 212 761-5863

Fed and Treasury liquidity provisioning.

• Friday's Selloff...Friday’s move lower was led by Semiconductors and

Memory stocks, where sharp year-to-date gains met crowded positioning

across hedge funds and levered ETFs. According to our Prime Brokerage

Content team, Semis now represent ~25% of the global hedge fund book.

Our QDS team estimates that levered ETF activity had created more than

$225bn of global equity demand year-to-date through Thursday, with

Friday’s selloff reversing some of that through an estimated $55bn of selling

on the day. Dealer positioning likely amplified the downside. From here, the

path for markets will likely depend on how quickly positioning normalizes, as

well as how rates, rate volatility, oil, and the US dollar trade. Liquidity also

bears watching. In our view, Fed and Treasury-driven liquidity has been

tightening after the rapid expansion seen in the first quarter, a dynamic

already reflected in the poor performance of precious metals and