Morgan Stanley warns markets may be underpricing structural risks despite rally

Morgan Stanley warned that markets may be underpricing longer-term structural risks despite the recent equity rally, saying investors appear to be treating inflation, rates and geopolitical tensions as temporary. In a note from CIO Lisa Shalett, the firm flagged three structural shifts—changes in the nature of military conflict, strains between the U.S. and allies, and rising resource nationalism—that could raise risk premiums. The report noted the S&P 500 has rebounded from a near 10% March drop and risen more than 12% to new highs, while the Nasdaq posted its longest winning streak since 1992. Morgan Stanley remains cautious on equities and prefers active strategies over passive exposure as economic signals diverge.