Rudi's View | Oct 16 2025
Updates on Most Favoured, Best Buys, Conviction Calls and Model Portfolio changes.
By Rudi Filapek-Vandyck, Editor
Morgen Stanley
Morgan Stanley is tempering investors’ enthusiasm for the year ahead as US economic growth is forecast to slow in 2026 while inflation is expected to remain sticky.
No recipe for disaster, as the in-house view is equally that all market talk about AI bubbles and pending sell-offs is too bearish.
The number of rate cuts from the Federal Reserve will probably disappoint and yield curves will stay biased toward steepening.
All in all, Morgan Stanley’s favour rests with larger cap and quality companies, as well as with gold.
‘Maximum portfolio diversification’ is the new buzzword. Expectation is for 5%-10% gains for US equities in 2026, placing the S&P500 at 7200.
One statement stands out: “it’s an active trader’s market, not an investor’s market”.
And also: “We do NOT think that we are in an AI capex bubble yet but we are closer to the seventh inning than the second”.
In terms of portfolio exposures, the recommendations are to be Underweight unprofitable technology as well as Underweight small caps.
Instead the preference lays with midcap growth companies insulated from tariffs, as well as financials, energy, domestic industrials, healthcare, and media.
Morgan Stanley’s regional allocations are Overweight US and Emerging Markets and Underweight other developed markets (this would include Australia).
T Rowe Price
Portfolio managers at T Rowe Price are not buying the small caps hype that has erupted since August, led by the US.
Sure, they can see some reasons to back some smaller cap companies in the US following the recent passing of the One Big Beautiful Bill, a resurgence in M&A activity, and the Trump administration’s push on deregulation, among other factors, but what about economic growth slowing?
T Rowe Price suggests a more balanced approach will probably work best, combining some smaller caps with tested and proven large cap performers.
The asset manager currently has a Neutral stance on equities, again, on trying to balance “decent fundamentals” with “expensive valuations”.
Potentially, the better opportunities might well be outside US equities, albeit not necessarily in Australia.
The lack of corporate earnings growth locally in combination with signs of peaking economic momentum –and this was before the latest hawkish statements from RBA representatives—suggests to T Rowe Price the ASX might well be relatively more “expensive” than US markets.
T Rowe Price prefers to remain Underweight the Australian market, with Overweight portfolio positions reserved for Europe and Emerging Markets.
The full story is for FNArena subscribers only. To read the full story plus enjoy a free two-week trial to our service SIGN UP HERE
If you already had your free trial, why not join as a paying subscriber? CLICK HERE