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Thoughts on the Market

Thoughts on the Market

Written by: Morgan Stanley
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Short, thoughtful and regular takes on recent events in the markets from a variety of perspectives and voices within Morgan Stanley.

© Morgan Stanley & Co. LLC Daily Economics Personal Finance
Episodes
  • Inside the Biggest Bond Boom in Years

    Inside the Biggest Bond Boom in Years
    Oct 21 2026
    Can markets absorb this much new debt? Our panel examines strong demand for investment-grade bonds, stress in high-yield debt and the macro risks that could shape the next six to twelve months in credit markets.Read more insights from Morgan Stanley.----- Transcript ----- Andrew Sheets: Welcome to Thoughts on the Market. I'm Andrew Sheets, Global Head of Fixed Income Research at Morgan Stanley. Anish Shah: I'm Anish Shah, Global Head of Debt Capital Markets. Rehan Latif: I am Rehan Latif, Global Head of Credit Trading. Samer Oweida: And I'm Samer Oweida, Global Head of Foreign Exchange and Emerging Markets. Andrew Sheets: Today, a discussion of historical levels of bond issuance and how it could affect the broader markets. It's Wednesday, October 21st at 9am in New York. Gentlemen, it's great to talk with you. I think what we're talking about is an issue that really cuts across all parts of Morgan Stanley's businesses, from issuance to credit trading to macro markets and beyond. And I'd like to get into it, but just quickly to kind of frame where we are. Anish, we are in the midst of a historic investment cycle in AI CapEx. We're in the midst of a very large pickup in M&A activity that I also want to make sure we get into. But you sit at the intersection of our capital markets businesses. Talk a little bit about what we're seeing in the bond issuance space. Anish Shah: Sure, Andrew. I look after all of our new issue capital markets business in credit, and that's across the credit spectrum and across geographies. And I'm constantly looking to Rehan for the latest in investor sentiment and how we can deliver the right product for our issuing clients. And to Samer on macro views that impact our clients every day. We are in the midst of a significant decommoditization of new issue credit markets and a decompression in credit. It's really driven by four important factors. One is, as you note, unprecedented levels of issuance. Investment grade debt volumes are up almost 25 percent on the year. That's driven by the AI CapEx theme and a resurgence in M&A. Number two is the rate backdrop has been, to date, pretty constructive for credit. We've seen $100 billion of new cash come into investment grade credit. We've seen new pools of investors drive tremendous new capacity into credit markets, whether it be insurance, capital fueled by annuity investments or other private credit. We're also seeing an increase in complexity, and that's driven by the AI CapEx cycle and the interconnectedness between hyperscalers, the chip makers, the neo clouds, the data centers, and that's requiring an unprecedented level of innovation in structuring new solutions for issuers. And the last is the market is grappling with supply-demand dynamics and winners and losers in the AI thematic. Andrew Sheets: Rehan, that's actually a great place to turn to you because you're on the other side of this. You're focused on can markets absorb all of this supply? And I often kind of hear two narratives. You know, one is everything is great. You've got record issuance and record supply into the credit markets. And the other is cracks are forming. You're seeing widening of CCC spreads. You're seeing some headlines around some issuers running into more trouble. From your perch, how do you see things? Rehan Latif: So, Andrew, instead of two, I'll give you three narratives within public credit trading. One, I agree with Anish. I think first of all, I've got to thank Anish because it's never been busier on the public credit side because of the amount of issuance coming through. But there are, really, three different themes coming through. One, investment grade has been incredibly strong. The higher quality part of the credit market is benefiting from all this new investor money coming through at these higher rate levels. For the longest period of my 20-year career, 20-plus year career, we were in a zero-rate environment. At current yield levels, investment grade has never looked like a more attractive proposition. You add in growth in the U.S. and across the rest of the world, the reality is that investment grade looks like a very interesting investment thesis. And I think spreads continue to be appropriately priced for the risk. On the CCC side of the market, that's where we're seeing real dispersion. Where we're seeing investors from the distressed community, from the high yield community, really have to figure out how to refinance some of these names. And that's been where the real challenge has been from a credit perspective. And then obviously, you've got the hyperscalers that have come through in significant wave across many different parts of the capital market. So, one thing Anish mentioned was the number of different financings that are available to the hyperscalers. So, I do think that given the cash flows that these hyperscalers actually have, you've managed to be able to attract a new investor base to our market as ...
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    13 mins
  • AI’s Next Winners: Signals From Private Markets

    AI’s Next Winners: Signals From Private Markets
    Oct 20 2026
    With AI startups scaling at record speed, our analysts Sabrina Hao, Adam Wood and Brian Nowak share takeaways from Morgan Stanley's Spark Conference on AI returns, competitive moats and implications for public markets. Read more insights from Morgan Stanley.----- Transcript ----- Sabrina Hao: Welcome to Thoughts on the Market. I'm Sabrina Hao, Morgan Stanley's AI and Tech Thematic Equity Strategist. Adam Wood: And I'm Adam Wood, Head of U.S. Software Research at Morgan Stanley. Brian Nowak: And I'm Brian Nowak, Head of U.S. Internet Research. Sabrina Hao: Today, what private companies are telling us about the AI opportunity and what it means for public markets. It's Tuesday, October 20th, at 10am in New York. Last week, we were at our Spark Private Company conference in California, bringing together more than a hundred startups across software, robotics, AI infrastructure, and beyond. There was even a company helping to manufacture pharmaceuticals in space. It was a really interesting week to be at the conference given everything that was happening in the market. But really, we came away feeling even more positive about the AI cycle. While public market investors are waiting for returns to justify trillions of dollars in AI spending, we're already seeing that pay off in private markets. AI demand is real, companies are delivering tangible returns for customers, and startups are scaling faster than ever. Adam, let's start with growth. We heard from startups scaling at extraordinary speeds. One was approaching [$] 4 billion in annual recurring revenue in two years, another reaching a billion in under a year. What really stood out to you about the pace of AI adoption, and why aren't we necessarily seeing that same growth at established software companies? Adam Wood: So yeah, absolutely, the pace was remarkable. And clearly one of the standouts from the conference when we used to discuss how quickly a company could get to a $1 billion so-called unicorn valuation. And now we're discussing how quickly they can get to a unicorn revenue run rate of a billion dollars, which for me is quite incredible. But I think I wouldn't make the debate simply about private versus public companies. I'd make the distinction between two different types of software. I think we have to make a distinction between largely coding and inference tools. There were a number of coding and inference software companies at the conference, and application software. And I think there's a big difference in terms of time and complexity to bring these products to market. I think the coding and inference, which tends to be the building blocks, as I would call them, underneath the application layer, they can be constructed much more quickly. And I think because we can adopt when we're still building bespoke, which I think is a lot of the phase we're in today, we're still building bespoke software rather than buying off the shelf. They can be adopted earlier as well. So, we've got faster time to build and faster time to adopt by companies. So, I think it's natural you can see very fast growth in those types of businesses very quickly. I think in the application landscape, it's a little bit different because those applications have to deliver complete business solutions for customers. In finance and customer service, that means integrating data, understanding workflows, and putting controls in place. There's much more to build and much more to implement, and generally, the adoption of those tools takes place a little bit later. After we've gone from the bespoke phase where companies are building themselves, we go to a phase where companies see that there are off-the-shelf packages that are available, that companies have built out. So, I think it's both a complexity of build debate and also, a time in terms of where we are in the software adoption cycle. The second thing I'd say is, you know, in public software companies that have a big incumbent existing business, sometimes there can be that big incumbent business that's not growing very quickly. And a very fast-growing AI business in there as well. And that very fast AI growth business can be hidden a little bit by that large public software company that exists. So, I don't think it's as straightforward as just saying, you know, private's growing very quickly, public not. I think there's a couple of layers of complexity in there in terms of what type of software you're dealing with. And then how big the existing kind of business is in a software company and what is kind of existing software growing a little bit less quickly. And then the AI bit that could potentially be growing very fast. Sabrina Hao: Absolutely. It makes a ton of sense. Maybe on this theme of full stack solutions, you know, Brian, we heard about the shift from AI assistants to agents that can actually execute work. You've done a lot of work on this, both across consumer and enterprise. What did you learn...
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    10 mins
  • A Narrower Path for Growth and Stability

    A Narrower Path for Growth and Stability
    Oct 19 2026
    Higher rates can take time to filter through the economy, making their full impact difficult to judge. Arunima Sinha from our U.S. and Global Economics teams considers where the pressure may emerge next and how policymakers could navigate the competing risks.Read more insights from Morgan Stanley.----- Transcript ----- Welcome to Thoughts on the Market. I'm Arunima Sinha, from the Morgan Stanley’s U.S. and Global Economics teams. Today, I'll talk about what rising rates mean for economic activity, inflation, and the policy path. It’s Monday, October 19th, at 10am in New York. The FOMC raised rates in September. But expectations for future hikes remain volatile. Within hours of the latest CPI print, markets round-tripped, pushing the probability to even for an October hike before retreating. Now, consistent with our baseline forecast, the market assigns December the highest likelihood for the next hike. But moves further along the U.S. curve matter even more; notably the 10-year yield shifted. One question that arises, taking a step back is – how much we should worry that broad-based inflation upside means tighter policy is required to push down inflation and, therefore, growth? Or have financial conditions tightened enough on their own that the central bank has less, not more work to do? The calibration of monetary policy has always been difficult, and now it is becoming urgent.Economists try to put the level of interest rates into the context of where they stand relative to the economy's natural rate. Stronger productivity growth and investment demand should mean a higher natural rate, so a given level of rates is less restrictive.The rise in long-term treasury yields alongside still firm growth and earnings expectations is an indication that the neutral rate may indeed be higher. When yields rise because growth prospects are improving, expected returns rise and the demand for capital strengthens. In that setting, higher rates are not necessarily contractionary.But there is a less benign alternative. Yields have also risen because inflation has been hot, fiscal concerns are intensifying, and investors are demanding more compensation for holding duration. The question that Chair Warsh has posed – are financial conditions restrictive – is starting to get a different answer. Calibration will be key to how the economy evolves. For the U.S. so far, even the most recent upside inflation surprise pointed to resilient demand rather than energy-driven stagflation. The simple explanation is that many firms still see returns well above their cost of capital. Recent work from our U.S. economics team supports such a view. Where there may be a contrast is at the sector level, and that seems to be becoming more apparent. If activity is concentrated in sectors driven by innovation, productivity, and strategic investment, the economy may be less rate sensitive than in past cycles. Calibrating policy amid these opposing forces is no easy task. The fact that we're seeing the biggest spread widening in the lowest quality part of the credit spectrum and the fact that housing activity is at recessionary levels are some tells in the U.S. that policy and financial conditions are restrictive. The signs of tighter financial conditions are somewhat more visible in Europe, in part because the AI CapEx spend is less of a factor. Growth has been resilient, but not sufficiently so to offset rising fiscal concerns from higher rates. The French OAT sell-off shows how quickly the balance of risks shifts. Globally, financial conditions are introducing tougher questions to the macro landscape. Until recently, the economy's message had been clear.Higher rates were restraining some sectors, but without meaningfully altering the expansion's trajectory. As long as expected returns rise alongside borrowing costs, then yields can remain high – without becoming decisively restrictive. But as our rate strategy colleagues have noted, inflationary pressures have pushed up real rates, not break evens. So, the market is telling us that policy is getting tighter to restrain growth and eventually pull-down inflation. The latest inflation print in the U.S. reinforces this debate. Are financial conditions restrictive?With several catalysts ahead, Q3 earnings, hyperscaler CapEx credit spread widening, and U.S. elections, the Fed meeting coming up, markets will need to shift to assessing growth risks as central banks try to recalibrate. Thanks for listening. If you enjoy the show, please leave us a review and share Thoughts on the Market with a friend or colleague today.
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    5 mins
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