Morgan Stanley

MS stock moves as the bank pivots to expecting a December Fed rate cut, shifting market bets on financials.

Shares reacted this week after Morgan Stanley revised its economic outlook and now forecasts a 25 basis‑point Federal Reserve cut in December, a sharp reversal that changes near‑term rate expectations for banks and markets. The change ripples through fixed‑income and lending outlooks—boosting prospects for net interest margin compression timing and altering investor positioning across the sector.

• Fed outlook reversal: Morgan Stanley now forecasts a 25bp Fed cut in December after recent Fed communication and softer U.S. data, a quick policy call reversal that signals the firm sees downside risk to near‑term growth and inflation, and pushes markets to price earlier easing than previously expected.
• Market implication for bank revenue: The firm’s shift implies earlier rate normalization for markets and could accelerate repricing in Treasury and credit markets, which affects trading revenue and the outlook for net interest margins across big banks including Morgan Stanley.
• Investor positioning and flows: Traders have ramped up odds of a December cut following the call, prompting bond yields and rate‑sensitive asset flows to adjust—an outcome that may temporarily lift asset management and wealth flows while compressing future interest income projections for lenders.