Bloomberg Audio Studios, podcasts, radio news. Lisa Shellett has been around the black fourteen fifteen times. She was fourteen years old, she was at Alliance Bernstein working for Sandy Bernstein years ago. Drives a ship at Morgan Stanley. What I love about your note is you say, get over it. It's a complex situation. How do you sustain an investment plan given legitimate complexity.
I think you can't sustain one plan. You can't be anchored. We're our watchword right now is hyper vigilance. One of the things that has been very interesting to us that has differentiated twenty twenty six from you know, really the first three years of this bull market has been underneath the surface of the index. We've had extraordinary dispersion of
individual stock performance. So if you're a stock picker, which I grew up being and haven't really been able to do for the past fifteen seventeen years, this is you know, Christmas, and there's lots and lots of things to do below the surface, and so hypervigilance is one way to plan. But I think the second element of this tom is that you know, we're marveling at how little risk premia is really being priced into this market given the complexity.
I mean, not to you know, venture into hyperbole, but you know, this is a situation that is currently militarily
involving thirteen fourteen different countries. Now, I don't want to say the words world war, but you know this is this is the closest in my lifetime and so to me, you know, you know, putting that complexity together with the fact that we're now seeing you know, from the policy side, what feels to me like not just a response but almost a panic in terms of the global desire to release energy reserves and the IEA in particular, you know, going out after you know, twenty five to thirty percent
of reserves.
Ten days in.
Yeah, that means you only have two two thirds left.
The heritage of Morgan Stanley starts with a woman named Mary who used to put out a deck eighty pages. I hated or you had to read every page of it. You people own the analysis of technology, particularly on the Left coast. Is this the mother of all opportunities in a software AI scare?
I don't know that I'd call it the mother of all opportunities. I mean twenty twenty two, the selloff in twenty twenty two is a pretty good opportunity because that was so focused on technology. But there are a lot of things to do, and we are, you know, picking through the rubble. We're picking through, you know, some of the software. We're funding it from some of the semiconductor makers.
In fact, you know, I'm trying to remind people that semiconductors are actually cyclical and typically trade on normalized earnings, not peak earnings.
People, Lisa, you are the CIO of Morgan Stanley Wealth Management, and you just wrote that US equity resilience in the face of Warren oil shocks is largely unprecedented, like such as like we're seeing and you're going back at least eighty years here. I mean the investors you're talking to, you, do you find more of them interested in bargain hunting in the current environment or looking to put on protection or looking for safe haven places to hide in the
current environment. What have your conversations with client's been like, So.
It really depends on where you sit. For much of our private wealth, business, family offices, ultra high net worth individuals, they're much more defensive. They're much more concerned about about, you know, risk premium about being defensive about having some
cash on the sidelines. But you know, the more institutional folks, uh have still have some animal spirit here, and uh you know, have have kind of deep belief that this is going to be over quickly and that the underlying fundamental story of profit acceleration because of AI still lives.
So what about some of these I'm going to go there, quantum computing, bitcoin mining, flying taxi companies, new energy, all these kind of you know, small cap growth stocks, all
these meme themes. What are your thoughts there? I mean, do you still tell investors, hey, you know you want to you know, you have to be exposed in order to benefit from it, right, I mean, like, is it is it a non non zero probability that you're basically telling investors, hey, you know you can't just run and hide from some of these some of these sectors.
So absolutely, we are fundamental believers in thematic investing. I know, you know, Tom has my colleague Ellen Zentner on very often, and she's she's running thematic for us. But what we're doing is we're trying to access those opportunities more in venture capital today and in growth private equity than we are in the public market. What we've said is that public small cap, we believe is really experienced adverse selection.
That the level of the lack of profitability in the Russell two thousand, for example, is just so uninspiring.
I'll say my book. Folks, Listen carefully to what Michelle just said. There, profit is everything. Yeah, this is from late magdal Lord to side at lcre Well.
I guess what we're saying is that in some of those sectors, Tom, you know, the real companies, the real profit orient the ones who are actually making money and are going to benefit, they're not publicly traded.
Came up in Phoenix with Cam Dawson the other day. Great panel. I'm sorry. Profit matters. It's all there is to it. So here's what I did, Lise. I did this just for you. I pulled up the Dow. It's a winsor war chart Herman vagg Okay nineteen thirty nine all the way out to nineteen forty six. I lectured about the Guadalcanal low of nineteen forty two, the absolute bottom of a perfect war, and then a moonshot for equities off of nineteen forty two. Do stocks go up in war.
It depends. But I think look, fundamentally, yes, you know, fundamentally, wars are reflationary, right, whether we're talking about you know, just a world based on the inflation and the nominals, or we're talking about defense spending and quote unquote the military industrial complex. Wars get economies moving and doing things well.
For audience, If you ever have the benefit of reading Lisa Shallitt's work, you know you're going to see that she knows everything from equities to fixed income, to commodities, you name it. But hidden within her note is a little bit on emerging markets, tom and she is suggesting that investors focus on Latin America as opposed to Asia.
And I'm curious, is that more driven by what's going on in the energy markets, the fact that Asian economies tend to be oil importers, or is there something else there?
So there's something else going on. Certainly the oil and energy dynamics have reinforced that dichotomy between Latin and and Asia. But what had gotten our attention really is, you know, the the change in US policy to the extent that that uh, you know, the new Monroe doctrine or or
new implementation of it. That that creates backing for a more business centric or or business oriented and less progressive governments down there that are stable, that are are attracting investment that is sponsored by US, development of supply chains. That's a good thing, and uh you know, that's part of our thesis of of why you should be looking down there.
Lisa, thank you so much for coming. I really appreciate the.
Stem my pleasure
Sporting Morgan stand Lisa driving all of their wealth management uh work here