The Tell: Away from S&P 500 and other tip indexes, markets are working as if it’s late in a cycle: Morgan Stanley strategist

You would have a tough time convincing someone looking during a vital U.S. stock-market benchmarks that they’re giving a coming of being during a finish of a cycle.

The SP 500

SPX, +0.18%

, for instance, has purebred 12 record-high closes this year, climbed in 15 out of a final 19 weeks, and is adult 23% from a 52-week low.

Yet Andrew Sheets, arch cross-asset strategist during Morgan Stanley, says there are late-cycle indicators in stream markets.

“Historically, in a ‘downturn’ proviso of a indicator, long-dated holds outperform stocks. Defensive and large-cap equities (modestly) outperform cyclicals and tiny caps. U.S. bonds (modestly) outperform those in a rest of a world. Investment class credit earnings some-more than high yield. Precious metals outperform other commodities. All have been happening, not only year-to-date, though for a improved partial of a year,” he wrote in a note to clients.

The SP 500 has gained 22% over 12 months, compared with only 8% expansion for a Russell

RUT, -0.36%

and a 10% benefit for a MSCI World ex-USA

664211, +0.00%


The iShares iBoxx investment-grade corporate bond ETF

LQD, +0.24%

has gained 16% over 12 months, compared with a 9% lapse for a SPDR Bloomberg Barclays high-yield bond ETF

JNK, +0.05%


Gold futures

GC00, -0.12%

have climbed 18% over 12 months, compared with a 6% decrease for crude-oil futures

CL.1, +0.23%


“It suggests that normal approaches to a stream cycle have been and are still providing useful information. They shouldn’t be rejected simply since a SP 500 has remained strong,” Sheets wrote.

Morgan Stanley, it should be noted, suggested clients to be underweight in early July, a call it topsy-turvy in mid-November.

And what should investors do? Sheets suggested progressing some-more change until these issues are resolved, as a attorney is “strategically neutral” toward tellurian credit and equities.

Steve Goldstein is MarketWatch markets editor for Europe. Follow him on Twitter: @MKTWgoldstein.

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