Why Morgan Stanley Sees Opportunities in Japanese and European Stocks

Morgan Stanley’s Andrew Slimmon sees alternatives in Japanese and European markets, with European protection among the many sectors he flagged.

Slimmon mentioned the impression that these markets lag the US as a result of earnings typically disappoint is beginning to change.

What Morgan Stanley Sees in Japan and Europe

Slimmon, a managing director and senior portfolio supervisor at Morgan Stanley Investment Management, spoke on CNBC’s Squawk Box Asia. He tied Japan’s features this 12 months to corporations lifting their earnings estimates.

“We’re seeing lots of corporations which can be beginning to revise up their earnings estimates, and that’s, I believe, the important thing purpose why the Japanese inventory market has accomplished properly this 12 months,” Slimmon mentioned.

The Nikkei 225 exhibits how properly Japanese shares have done this year. By September 18, Japan’s Nikkei 225 had climbed about 25.4% this 12 months however remained almost 12% beneath its June report.

In Europe, he described protection as one alternative however not the one one. He pointed to banks, which he said have performed very properly. The STOXX Europe 600 Banks index had gained about 18.87% this year.

Slimmon mentioned shares are actually responding to the expansion mirrored in earnings revisions. He referred to as this the important thing distinction between 2026 and earlier years.

On US shares, he additionally mentioned slim breadth, the place just a few mega-caps carry the US index, isn’t at all times dangerous for shares. The Federal Reserve lifted its benchmark rate by 25 foundation factors to a goal vary of three.75%-4% on September 16. It was the central financial institution’s first enhance since 2023. 

Slimmon famous the market sat on the identical degree on the day of the hike as in May.

“So the market has actually treaded water right here for some time, and but earnings revisions hold going up. They hold going up. So I believe that’s why I stay optimistic,” he added.

Mike Wilson, the financial institution’s chief US fairness strategist, struck a extra cautious tone earlier this month. He warned that oil climbing to $120 or larger inside 30 days would drain liquidity.

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Morgan Stanley Swaps 12 of 15 Picks After a Market-Beating Year

The financial institution’s fairness strategists have additionally made their very own name on US shares. Morgan Stanley refreshed its Vintage Values listing, a roster of shares to carry for 12 months. The 2026 version returned 32.12% between September 9, 2025, and September 11, 2026.

The S&P 500 gained almost 19% over the identical interval, leaving the listing 1,316 foundation factors forward. Strategists narrowed greater than 50 analyst suggestions to fifteen for the 2027 version. Only Amazon, McKesson, and Visa carry over from final 12 months.

Alphabet, Apple, Coca-Cola, Dynatrace, Eli Lilly, Equinix, and Williams Companies are among the many new picks.

Of the 15 shares, 60% sit in the highest two high quality tiers, in contrast with 56% for the S&P 500. The listing additionally trades at a premium to the broad market on most valuation measures.

Equity strategist Michelle Weaver mentioned the listing has an “anti-momentum” tilt. 

“The shares on the listing are usually not merely shares which have labored not too long ago however quite ones our analysts have recognized for his or her robust bottom-up drivers,” Weaver wrote in a note.

Several of the brand new picks have lagged this 12 months. Eli Lilly was up about 8% as of September 21, trailing the S&P 500’s 13% acquire.

Alphabet had risen 10.5% by means of September 15, leaving it behind the index. Coca-Cola has been the standout, gaining roughly 28%.

That combine strains up with Weaver’s level that the listing isn’t merely a set of latest winners. Third-quarter earnings season, which contains Coca-Cola’s report on October 20, will provide an early learn on whether or not these company-level drivers maintain up.

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