Biggest near-term hurdle for markets is rates and policy, says Morgan Stanley's Simonetti

• The current market decline is seen as a correction within a bull market, not a sustained downturn.
• Investors are encouraged to add risk opportunistically and avoid staying on the sidelines in cash.
• Morgan Stanley's 2026 list recommends overweighting financials, industrials, healthcare, and consumer discretionary.
• They recommend underweighting staples and real estate.
• Tech, communication services, utilities, materials, energy, and consumer services are rated equal-weight.
• The focus should be on identifying companies with pricing power that can generate revenue even if demand or consumer sentiment softens.

Katerina Simonetti of Morgan Stanley Private Wealth views the current market downturn as an "incredible buying opportunity" within a bull market correction. She advises investors to add risk opportunistically, focusing on sectors with pricing power like financials and industrials, rather than waiting for an "all clear" signal.