Morgan Stanley strategist Michael Wilson says a further sharp rise in oil prices
is the biggest risk to U.S. equities and recommends using energy stocks to hedge
portfolio risk. He warned higher oil could push yields up and ultimately force
the Fed to act, noting Fed chair Kevin Warsh is seeking to return disinflation
to target. "By then, more responsibility will fall on the Fed rather than the
Treasury," he said. "We have no doubt the Fed will ultimately respond, but may
not act before markets suffer additional volatility." Wilson recommends
positioning in energy names as an oil hedge; Exxon Mobil Corp and Chevron Corp
are both up more than 30% YTD, over twice the S&P 500's gain. He reiterated a
preference for so‑called "high-quality stocks"—companies with more stable
earnings, higher margins and stronger operating efficiency.
