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Look to Japan and European markets for investment opportunities, including the banking and defense sectors, Morgan Stanley said. While there is an impression that these stock markets lag the U.S. because earnings often frustrate pricing expectations, that is changing, said Morgan Stanley’s senior portfolio manager Andrew Slimmon on CNBC’s ” Squawk Box Asia .” “We’re seeing a lot of companies that are starting to revise up their earnings estimates, and that’s, I think, the key reason why the Japanese stock market has done well this year,” said Slimmon. “And also Europe and defense is one industry, but it’s not the only industry. Look at the banks; they’ve done very, very well,” he said. Stocks are responding to the underlying growth revealed by companies’ earnings revisions. This was “the key difference between 2026 and really previous years,” Slimmon said. “I think the market will really take off as investors realize the earning story is powerful,” he noted. With regards to U.S. markets, while some may be concerned by narrow breadth – where a small handful of mega-cap stocks drive an index higher while most other stocks lag or decline – this is not necessarily always bad for equities, according to Slimmon. He noted that when the Fed raised rates last Wednesday, the market was at the same level it was in May. “So the market has really treaded water here for a while, and yet earnings revisions keep going up. They keep going up. So I think that’s why I remain optimistic,” he added.
