This would likely cause underperformance among rate-sensitive stocks, particularly small caps.
Morgan Stanley further anticipates tariff-related cost pressures to emerge later this year, potentially squeezing company margins and pushing inflation higher.
These effects could influence the Federal Reserve’s outlook on rate cuts.
Meanwhile, Jefferies revised its year-end forecast for the S&P 500 to 5,600, up from a previous projection of 5,300, as per a note the brokerage published Friday.