Morgan Stanley's research department published a research report saying that there are signs that the US economy is cooling down, that deflation will return to the April CPI data and accelerate in the second half of 2024.
“As deflation accelerates in the second half of 2024, inflation data for the next few months will weaken, which should provide the Fed with the confidence it needs to believe that inflation continues to advance towards the 2% target,” Morgan Stanley Research wrote in a recent report.
The agency said, “We are still optimistic that the Fed will cut interest rates three times this year, but starting in September instead of July, and cutting interest rates two more times in November and December.”
In this context, Morgan Stanley wrote that it currently favors essential consumer goods stocks over non-essential stocks.
The Morgan Stanley report said, “We believe that the US essential consumer goods industry is in a better position compared to non-essential consumer goods stocks. Furthermore, compared with the non-essential consumer goods sector, consumer goods companies have recently turned higher relative to earnings revisions, indicating that there is potential room for improvement in the latter's relative performance.”