TLDR:
- The AI theme is losing its appeal to investors, prompting them to seek defensive stocks.
- Morgan Stanley’s Chief US Equity Strategist, Mike Wilson, recommends defensive plays in sectors like utilities, consumer staples, and healthcare.
Investors are becoming disillusioned with the AI sector as returns fail to meet expectations. As a result, they are turning to defensive stocks while waiting for new investment themes to emerge. Morgan Stanley’s Mike Wilson points out that the AI sector, particularly semiconductor stocks, has seen a decline in value. This shift in sentiment is not necessarily negative for the long-term outlook for AI, but rather a temporary setback. Wilson suggests that defensive stocks in sectors like utilities, consumer staples, and healthcare are poised to perform well in the current market environment, characterized by a slowing labor market. In response to these market conditions, Wilson’s team has added three new defensive stocks to their portfolio. Overall, the article highlights the importance of adapting investment strategies to evolving market trends and the need for investors to diversify their portfolios to mitigate risks.