Morgan Stanley Sees Stocks Hit in Bond Rout as Bull Market Forms

This month’s selloff in U.S. government bonds could spark a correction in equity markets before a new cycle of stock gains, according to Morgan Stanley.

“There is growing evidence that long term nominal yields are making a secular trough with several near term catalysts that may extend last week’s rise,” strategists including Michael Wilson wrote in a note on Monday. “Such a development could prove to be very challenging to many equity portfolios that likely embed higher long duration risk than may be appreciated.”