Wealth Management — May 2, 2025

What Happened in the Markets?
- The S&P 500 increased 1.5% Friday to end the day at 5,686.67, having lost 3.3% thus far in 2025.
- All 11 S&P 500 sectors were higher on the day, as Communication Services (+2.3%) and Financials (+2.2%) were the strongest-performing S&P 500 sectors, while Utilities (+0.7%) and Consumer Staples (+0.6%) underperformed.
- By the 4:00 p.m. equity market close, the US 10-year Treasury yield increased to 4.31%; WTI Crude decreased to $58.56 per barrel; and gold increased to $3,241.02 per ounce.
Why Did This Move Happen?
- US equities ended higher on Friday for a ninth consecutive day of gains, making up the longest upward streak for the S&P since 2004. The index ended the day above pre-Liberation Day levels, registering back-to-back weeks of gains for the first time since January, as US-China trade relations showed signs of thawing. China quietly exempted approximately $40 billion of US goods from tariffs, along with announcing that trade talks are being considered.
- April’s labor data suggested resilience in the labor market, helping to alleviate growth concerns. Non-farm payrolls beat expectations, growing by 177,000 compared to consensus of 130,000, overcoming modest negative revisions to the previous two months. Hourly earnings grew by 0.2% in the month, and the unemployment rate held steady at 4.2%, as expected.
- Treasury yields rose across the curve, and the US dollar softened on April’s strong labor data. Additionally, investors trimmed expectations for near-term Fed cuts, with the odds of a cut at the June FOMC meeting falling to 34%.
S&P 500 vs. 50-, 100-, and 200-Day Moving Averages

How Does the Move Relate to Our Tactical Positioning?
- The GIC recommends preparing for sideways-churning markets, a modest overweight to growth equities with a neutral weight to value equities, and erring on the side of asset class diversification. With megacap and large-cap stocks likely continuing to trump small caps, adjust duration slightly lower in rates and corporate credit, and use real assets and hedge funds to help mitigate emerging risks. The GIC consistently re-assesses its outlook in light of incoming data points.
- Please find more information on the GIC's tactical positioning on the next two pages and reach out to your Morgan Stanley Financial Advisor to discuss portfolio strategies.
Equities
US: The recent corrections in both the Nasdaq Composite Index and the S&P 500 Index provide some relief to overstretched valuations, while the Federal Reserve’s policy pause and the DeepSeek events have cooled the GenAI fever breaking the bull case. The uncertainty shock to confidence from Trump 2.0’s rapid-fire policy agenda is leading to cuts in GDP that should translate to negative earnings revisions, but a soft landing is still the base case as long as the labor market holds. We are buying equal-weighted indexes, quality-cash-flow stories in both growth and value universes and mid-cap growth names.
International Equities (Developed Markets): Recent outperformance has been catalyzed as responses to the “America First” agenda have driven fiscal stimulus and concerns about tariffs have been cooling rest-of-world (ROW) inflation. This is creating ROW opportunities to simultaneously enjoy monetary, fiscal and currency-related stimulus. The outlook is improving in Japan and Europe.
Emerging Markets: China stimulus, while potentially insufficient to address the challenges of the country’s secular bear market, is likely enough to help stabilize the downturn in the short term. The US-China trade conflict remains a wild card, and we expect the “bazooka” of China stimulus may come in light of ongoing trade tensions. Given that valuations in the region are already nondemanding, we are inclined to be patient and wait for recovery. A weaker US dollar and lower global energy prices are positives for Latin America and Southeast Asia.
The Global Investment Committee's Tactical Asset Allocation Reasoning

Fixed Income
US Investment Grade: Corporate cash flows remain resilient even with recession risks rising. Spreads have partially adjusted to these realities, and default risk remains modest. While interest rates have backed up to reflect “higher-for-longer” expectations, there is good value and "coupon" in the belly of the curve. With geopolitical uncertainty high and equity valuations broadly rich, we like coupons of bonds with index-matching and shorter durations. Municipal securities are exhibiting good value but should be actively managed for credit concerns in a new world of federal funding priorities.
International Investment Grade: Yields are decent, central banks have begun to cut rates and there is room for spread tightening as economic growth improves. Currency impact is a tailwind for US dollar investors.
Inflation-Protected Securities: Real yields have sold off and are now bordering on cheap relative to the past two years. The securities could be a potential buy in a stagflationary environment.
High Yield: We have eliminated our exposure to the equity-like asset class to reduce equity beta of portfolios. High yield bonds rallied aggressively after the unprecedented provision of liquidity from the Fed and fiscal stimulus from Washington. However, we believe there is currently limited upside. Ultra-tight spreads may be the result of increasing competition for capital with private credit financial sponsors and general partners and may not fully reflect adequate compensation for default risk.
Alternatives
REITS: We expect higher stock-bond correlations, which places a premium on the diversification benefits of investing in real assets. Nevertheless, with real interest rates positive and services inflation remaining quite sticky, we would need to be selective in adding to this asset class broadly. We are focused on interesting opportunities aimed at solving the residential housing shortage.
Commodities: Global reflation, tense geopolitics, especially in the Middle East and ongoing fiscal spending suggest decent upside potential for precious metals and industrial commodities, including energy-related.
MLP/Energy Infrastructure: We previously increased exposure to real assets, with a preference for energy infrastructure and MLPs. Competitive yields and expectations for continued capital discipline amid stable oil and gas prices underpin our decision, as does hedging against geopolitical risks.
Hedged Strategies (Hedge Funds and Managed Futures): We recently added to equity hedged positions noting the pickup in idiosyncratic risk, falling borrowing costs and rising volatility. The current environment appears constructive for hedge fund managers, who are frequently good stock pickers and can use leverage and risk management to potentially amplify returns. We prefer very active and fundamental strategies, especially high quality, low beta, low volatility and absolute return hedge funds.
Morgan Stanley & Co.’s Key Market Forecasts

Market data provided by Bloomberg.
Dow Jones Industrial Average (DJIA): A price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry.
NASDAQ Composite Index: A broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market.
S&P 500 Index: The Standard & Poor's (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization US stocks.
US Trade-Weighted Dollar Index: A weighted average of the foreign exchange value of the 17US dollar against a subset of the broad index currencies that circulate widely outside the US.