In researching Salesforce (CRM) , which is plunging after soft revenue guidance and the news of the departure of co-CEO Bret Taylor, I came upon this doozy of a double run-on from something called AlphaCurrents issued by Morgan Stanley (MS) :
What a difference a year makes. At the onset of 2021, investors clamored to own growth stocks as low rates, rising retail investor participation and optimism that the pandemic had fundamentally accelerated opportunities for innovative businesses fueled historic speculation across the thematic growth equity universe. 2022 has seen something close to the opposite: A tightening Fed has put pressure on valuations, retail enthusiasm for stocks has subsided and concerns are growing that there could be some give-back of pandemic gains from many of the thematic outperformers of the past two years.
Indeed. Thank you! Morgan Stanley is always the Captains of the Obvious, but the key point to note there is that that report was issued February 16, 2022. So, with that backdrop, Shouldn't Morgan Stanley Wealth Management have been advising its clients to avoid equities? Hahahahhahaha. Yeah, that was a jokingly rhetorical question.
Apart from their incredibly brave Equity Strategist, Mike Wilson - who yesterday called for a severe plummet in the S&P 500 in 1H23 to between 3,000 and 3,300, which would represent a 20% decline from today's level - Morgan Stanley never does anything but push stocks on retail investors. Push, push, push.
And MS isn't the only firm that does that, but their ratings system is a dead giveaway to their motivation. Of the tech-heavy cohort of 30 stocks listed in the disclaimer to that AlphaCurrents report, 21 were rated as overweight. That was obviously an extraordinarily bad call given the performance of the Nasdaq since February 16th.
But I am not here to bash Morgan Stanley. I am here to bash the idea that some stocks should be overweighted or equally-weighted in your portfolio. In my 31st year of following stocks professionally, I can tell you the idea of constructing your personal portfolio by assigning relative weightings based on the sectoral weightings of the S&P 500 is a really, really dumb way to optimize your finances.
What absolute, utter nonsense.
That idea of relative portfolio-weighting assumes you should own stocks as institutions are forced to. Yes, forced to. Asset allocations are the way in which institutions attract and retain clients.
But you don't need to attract clients, you are one. That is the existential problem with believing the sell-side. The word "sell" is key, and I know this from having worked on the sell-side for more than a decade in London and New York for Lehman, DLJ and UBS.
There is just no reason you have to own stocks. Think for yourself, man. And if that thinking convinces you that rising interest rate environments are awful times to own Big Tech stocks, then you are already ahead of the game. And Morgan Stanley.
So, don't be fooled by the hucksters. If you own Exxon Mobil (XOM) and Chevron (CVX) , as my firm does, you would be crazy to sell them now and interrupt that stream of dividends.
Other than energy? It's just not the right time to have a weighting in so-called growth sectors, and every professional fund manager that I know is re-weighting their portfolios away from Big Tech and toward Big Oil. Bye-bye Elon, hello Mike Wirth.
That's how the game is played. Just make sure you are taking advice from those who have played it, not those who are attempting to play you.
Thus ends today's sermon. Happy December!
