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Andrew Sheets, Morgan Stanley’s Chief Cross-Asset Strategist, said in the latest client note, the US stock indices, including the benchmark S&P 500 index, have further scope for upside over the next 12 months.

Key quotes

“While the last four months have been exceptional, we think that this cycle has been, and will be, more ‘normal’ than appreciated.

We think that stocks and credit will be modestly higher and tighter over the next 12 months.

The S&P 500 index is seen at 3,350 points and benchmark US 10-year yields at 1.3% by mid-2021.

Suggest clients take long positions in US small caps and financials, the euro and emerging market currencies, such as the Indonesian rupiah and Indian rupee, and add a little bit more risk to their credit portfolios.

We recommend a broad rotation into cyclicals and value across global equities.”

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