The S&P 500 is about to conclude its worst quarter since 2022, and there’s a report overnight that the White House might be willing to wrap up hostilities while leaving Iran in charge of the Strait of Hormuz.

So it’s an interesting time for a shift in tone from Morgan Stanley’s cross-asset strategy team led by Serena Tang.

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Strategists lowered their rating on global stocks, while saying investors should hold onto more cash and U.S. Treasury securities.

They lowered their rating on global equities from overweight to equal-weight, while moving U.S. Treasurys and cash to overweight. They’re underweight other fixed-income while still liking U.S. stocks, citing their more defensive nature versus other regions, positive operating leverage, pro-cyclical policy and the potential for AI-driven efficiency gains.

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In short, they are waving the white flag on the idea of predicting when the war will end and the oil will flow.

“Uncertainty around the magnitude and duration of oil supply disruption means outcomes for risk assets have become increasingly asymmetrical. With potential downside rising significantly, we recommend turning defensive,” say the strategists.

The bank sees foreign central banks increasing interest rates — including 50 basis points of increases from the European Central Bank as well as an increase from the Bank of Japan. They expect the Fed to be on hold at least through September.

To be sure, investors haven’t waited for the Morgan Stanley team to act.

The iShares MSCI ACWI ex US ETF ACWX has dropped 11% from its late February peak, before the bruising U.S. and Israel war on Iran which sent oil prices surging. The S&P 500 SPX is down 8% from its late January peak.

U.S. stock futures ES00 YM00 NQ00 are higher, along with gold GC00 and silver SI00, with Treasury yields BX:TMUBMUSD10Y falling. Oil prices CL00 BRN00 are rising.

Key asset performance

Last

5d

1m

YTD

1y

S&P 500

6343.72

-3.61%

-7.82%

-7.33%

13.04%

Nasdaq Composite

20,794.64

-5.25%

-8.59%

-10.53%

20.21%

10-year Treasury

4.323

-4.60

25.10

15.10

14.60

Gold

4580

3.85%

-14.17%

5.72%

45.06%

Oil

103.23

16.13%

45.33%

79.81%

44.58%

Data: MarketWatch. Treasury yields change expressed in basis points

President Donald Trump is reportedly looking to end military operations in Iran, even if the Strait of Hormuz isn’t opened. Iran reportedly struck a tanker near Dubai.

Gasoline prices topped $4 per gallon, on average, for the first time since the war began, according to AAA.

Nvidia NVDA took a $2 billion stake in Marvell Technology MRVL.

Warren Buffett said on CNBC that he regretted selling part of Berkshire Hathaway’s Apple AAPL stake.

Unilever UL and McCormick MKC are merging their food businesses in a cash-and-stock deal.

Nike NKE will report results after the close, with first-quarter earnings season starting in just two weeks.

The S&P Case-Shiller home price index is due at 9 a.m., with job openings and consumer confidence at 10 a.m. Chicago Fed Pres. Austan Goolsbee will speak at noon, with Fed Gov. Michael Barr and Fed Vice Chair for Supervision Michelle Bowman due to speak later.

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Hegseth’s reported interest in buying a defense fund highlights just how poorly contractors have traded since the war began.

Japan is placing a big bet on U.S. housing.

These were the top-searched tickers on MarketWatch as of 6 a.m.:

Ticker

Security name

NVDA

Nvidia

TSLA

Tesla

AMZN

Amazon

NKE

Nike

MU

Micron

GME

GameStop

INFY

Infosys

TSM

Taiwan Semiconductor Manufacturing

MSFT

Microsoft

AMD

Advanced Micro Devices

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