Weekly Warm-up: The Winds of Change

Research evidence excerpt

Weekly Warm-up: The Winds of Change

Idea

June 29, 2026 04:01 AM GMT

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

Equity Strategist

Weekly Warm-up: The Winds of M.Wilson@morganstanley.comAndrew B Pauker +1 212 761-2532

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

Change Michelle M. Weaver, CFA

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

Strong earnings for the median stock, falling crude prices and Diane Ding, Ph.D.

underperformance of the Hyperscalers and now Semis are QuantitativeQian.Ding@morganstanley.comStrategist +1 212 761-6758

driving a broadening in a weaker tape. We remain constructive Nicholas Lentini, CFA

on Discretionary Goods, Transports and Regional Banks as EquityNick.Lentini@morganstanley.comStrategist +1 212 761-5863

popular momentum trades come under further pressure.

• Breadth Is Improving as the Equal Weighted Index Outperforms... This is

being driven by an underappreciated recovery in earnings across the market.

As revenue growth returns atop lean cost structures, operating leverage and

EPS growth have reached their strongest levels since 2021—aka the rolling

recovery. The median S&P 1500 stock is now delivering double-digit earnings

growth, the fastest pace in several years. We continue to recommend

exposure to this broadening theme through Discretionary Goods, Transports,

and Regional Banks (see here, here, and here).

• ...The Broadening Is Likely to be Further Enhanced by Falling Crude

Prices... We have maintained a more bearish oil view than consensus over

the past 1–2 months, driven less by a potential US-Iran deal and more by the

leading signals from the Brent-WTI spread & energy stocks'

underperformance since the war began (see here). Longer term, the conflict