Morgan Stanley noted that the current earnings season has seen a notable high beat rate, but the response in stock prices has been subdued.
They attribute this phenomenon to the pressure on valuations stemming from the rise in interest rates, a trend that may persist in the short term unless Federal Reserve Chairman Jerome Powell unexpectedly leans towards a more dovish stance at the upcoming Fed meeting.
Looking ahead to June, they anticipate that comparisons with easier bond yields from the previous period could pose a challenge to valuations, even if interest rates remain stable at their current levels.
However, they express optimism that the headwinds from interest rates should gradually diminish beyond June, provided that bond yields do not experience a significant acceleration during the summer months.
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