Prominent Wall Street short interest: Investors should lock in defensive stock returns and wait for clearer employment data

According to the Vzhitong Finance APP, Morgan Stanley strategist Michael Wilson stated that investors should focus on the returns of US defensive stocks, as their recent outstanding performance has made their valuations appear high. Wilson's team, which is neutral on so-called defensive stocks related to economically cyclical sectors, is waiting for "clearer" employment data, as they believe employment data is a key driver of the year-end stock market. The strategist at the firm wrote in a report, "It makes sense to take profits from the recent outstanding performance of defensive stocks without knowing the results of the next labor report." In recent months, due to concerns about a US economic recession, investors have flocked to stocks considered relatively unaffected by economic downturns, such as healthcare and utilities. Since the end of June, a basket of defensive stocks from Citigroup has risen by about 11%, outperforming the 8.5% increase in the similar cyclical stock index. However, last week's first interest rate cut by the Federal Reserve in four years helped alleviate concerns about economic growth, with the S&P 500 hitting a historic high after the rate cut decision. Traders expect more accommodative policies before the end of the year. The Morgan Stanley team stated that defensive stocks typically perform "moderately" in the month following the Fed's first interest rate cut. However, they noted that defensive stocks continue to perform well over the next 3 to 12 months. Wilson is one of the most notable bearish stock market analysts until mid-2024. In Monday's report, he reiterated his preference for large-cap stocks with strong earnings prospects. Other market strategists from Citigroup and Barclays are more optimistic about the prospects for cyclical stocks, especially in Europe. Industries such as automotive manufacturing and retail, which are more sensitive to macroeconomic factors, make up a significant portion of the benchmark index in the region. However, Morgan Stanley strategist Mislav Matejka stated that he remains bearish on European cyclical stocks due to expected declines in bond yields, downgrades in earnings ratings, and "unattractive valuations."