Amid uncertainty, relative value trades may offer relief

AMID UNCERTAINTY, RELATIVE VALUE TRADES MAY OFFER RELIEFNew tariff headlines have been adding to policy uncertainty, and while growth expectations are slowing, Mike Wilson, equity strategist at Morgan Stanley (MS), says that "the good news is it's been a rich environment for relative value trades."As Wilson sees it, stocks' rate sensitivity has diminished as the 10-year yield has settled below the 4.50% level, meaning lower rates are currently not benefiting equity returns to the extent they were just a couple of weeks ago.This, because he believes softer growth expectations are the reason behind falling yields. "What this means for the time being is that growth (both economic and earnings) is now the prominent driver of equity indices," writes Wilson in a U.S. equity strategy note.He adds that while the growth backdrop has been clouded recently, it's been an enticing environment for relative value trades.Wilson says that consumer discretionary services has meaningfully outperformed goods, as tariff-sensitive consumer goods stocks have underperformed. Additionally he says that financials (MS' top pick within cyclicals) made a new relative high last week, and software over semis was up 6% in equal weighted terms through last Friday.Wilson continues to view the quality factor as the best hedge against policy uncertainty.(Terence Gabriel) *****FOR MONDAY'S EARLIER LIVE MARKETS POSTS:GAUGING THE CRYPTO ETF FILING CRAZE - CLICK HEREBARKING TARIFF UNCERTAINTIES START TO BITE: PMI, CONSTRUCTION SPENDING - CLICK HEREU.S. STOCKS MIXED AFTER DATA, EYE TARIFFS - CLICK HERELOW VOLATILITY, MOMENTUM MAKE AN EARLY MOVE - CLICK HEREEUROPEAN DEFENCE SECTOR: MORE GAINS ON THE HORIZON? - CLICK HERECHINA STOCKS, WHAT'S NEXT AFTER 40% RALLY? - CLICK HERECRYPTOCURRENCIES HAVE THEIR "TRUMP PUT" - CLICK HEREDEFENCE NAMES SURGE, BROADER MARKET MIXED - CLICK HEREEUROPE BEFORE THE BELL: FUTURES HIGHER, MARKETS SET FOR DEFENCE BOOST - CLICK HERETRUMP FLAGS CRYPTO RESERVE, MUM ON FUNDING - CLICK HERE