Author：Wall Street CN
Despite the sharp market volatility at the beginning of 2026, with significant fluctuations in everything from Japanese government bonds to technology stocks, beneath the surface...Almost all indicators related to the global cyclical outlook are strengthening in tandem, a rare and consistent signal that deserves serious attention from the market.
Morgan Stanley released a report on February 8th titled "What's Next in Global Macro—Noisy Markets, Aligned Indicators." The report noted that copper prices have surged 36% in the past six months, the South Korean stock market has soared 68%, leading the global market, financial stocks have outperformed the broader market in the US, Europe, China, and Japan, and small-cap stocks, cyclical stocks, and emerging market currencies have all strengthened.
The simultaneous easing of fiscal, monetary, and regulatory policies globally, coupled with increased AI investment and a wave of mergers and acquisitions, raises the possibility that the cycle will "burn even brighter before it dies down." Key signs of overheating have yet to emerge.Investors need to closely monitor five key indicators: inflation, bond volatility, the US dollar, credit, and whether stocks and credit decline when data is "good."
Morgan Stanley is bullish on the global cycle and maintains a broad-based trading strategy. Specifically, the institution...We are optimistic about Japanese stocks, US small-cap stocks outperforming large-cap stocks, US high-yield bonds outperforming investment-grade bonds and high-yield mezzanine bonds, and believe that emerging markets will continue to outperform, especially Latin American markets.
Rare Indicator Consistency: A Strong Signal Deep Within the Market
Morgan Stanley emphasizes that a single indicator can become ineffective at any time. However, when multiple indicators point in the same direction simultaneously, it becomes a point of great interest.Let's take a closer look at the performance of these economically sensitive indicators:
Copper, an economically sensitive commodity, has risen 36% in the past six months; the South Korean stock market, with its above-average cyclicality and sensitivity to global trade, has surged 68% over the same period, becoming the best-performing market among all major stock markets; and the financial sector, at the heart of credit creation, has outperformed the market in the US, Europe, China, and Japan over the past six and twelve months.
Year-to-date data further confirms this trend: cyclical and transportation stocks have outperformed, small-cap stocks have led the gains, market breadth has improved, the yield curve has steepened in a bear market, and emerging market currencies have strengthened. All these results are consistent with one underlying assumption:Future global growth will be stronger than current levels.
Triple easing measures combined: an unprecedented stimulus package
What makes this consistency of indicators even more noteworthy is its context. Morgan Stanley points out that...Fiscal, monetary, and regulatory policies are being eased "simultaneously and globally"—this combination of easing policies is itself a powerful driving force.
At the same time, AI investment continues to grow significantly, and M&A activity is surging. These are powerful drivers, and combined with all these optimistic indicators,This increases the likelihood that "the cycle will burn even brighter before it goes out."
Five overheating signals are being monitored: No alarms have been triggered yet.
But is this a good thing? Morgan Stanley raises a key question: Is the market currently overheated?
The agency listed five signs of overheating that require close monitoring:Is significant inflation imminent? Is bond volatility rising? Is the US dollar significantly deviating from its fair value? Is credit underperforming? Do stocks and credit fall when data is "good"?
The current answer is: Not yet.Long-term inflation expectations in the US and the Eurozone remain in line with central bank targets. Expected volatility in US interest rates has actually declined since the beginning of the year. The dollar's valuation is close to levels implied by purchasing power parity. Credit spreads are generally stable.
Better-than-expected U.S. PMI data last Monday led to a stock market rally and a credit rebound, while weaker labor data later this week had the opposite effect—in other words, "good data is good news."
Investment Strategy: Adhere to cyclical preferences and diversified allocation
Based on these analyses, Morgan Stanley maintains a positive cyclical bias and adheres to a broad-based trading strategy.Specifically, the institution is optimistic about Japanese stocks, US small-cap stocks outperforming large-cap stocks, US high-yield bonds outperforming investment-grade bonds and high-yield mezzanine bonds, and believes that emerging markets will continue to outperform, especially Latin American markets.
However, Morgan Stanley also cautioned that the recent weeks have been a "painful reminder" that growth is not a panacea, and that beneath the surface, there is a significant rotation between winners and losers. Overall,Morgan Stanley believes this consensus across multiple indicators still suggests a favorable fundamental outlook and remains bullish on the market until key indicators reverse.
