Geopolitics Tends to Create Good Buying Opportunities, Says Morgan Stanley's Andrew Slimmon

Why It Matters

Understanding that geopolitical shocks can present buying opportunities helps investors navigate market volatility and capitalize on earnings‑driven upside, while remaining vigilant about AI capex returns and oil price risks.

Key Takeaways

• Geopolitical tensions can generate attractive equity buying opportunities
• Earnings revisions now project 3.75% growth, supporting 20x P/E
• Market appears overbought at 7,100 but micro fundamentals remain solid
• AI-driven capex is high, but returns not yet evident
• Oil price spikes could shift outlook, but tax offsets mitigate impact

Summary

Morgan Stanley senior portfolio manager Andrew Slimmon argued that geopolitical events, such as the recent Iran cease‑fire, often create compelling entry points for equity investors. He emphasized that while macro headlines dominate headlines, the underlying micro fundamentals—particularly earnings revisions—remain the true driver of market direction. Slimmon highlighted that consensus earnings growth for the next year has risen to 3.75%, making a 20‑times price‑to‑earnings multiple appear reasonable despite the S&P 500 hovering near 7,100 and showing signs of being overbought. He noted that the market’s recent rally stems from strong earnings revisions, yet macro concerns like AI‑driven capex and oil price volatility continue to generate noise. Key quotes included, “Geopolitics tends to create good buying opportunities,” and “If rates don’t come down, 20 multiple is pretty reasonable.” He also warned against repeating last year’s sell‑off, noting investors are eager to buy the dip after missing previous opportunities. The takeaway for investors is to focus on earnings fundamentals and view geopolitical or macro shocks as potential buying moments rather than reasons to exit. Monitoring AI investment returns and oil price dynamics will be crucial for assessing longer‑term risk and reward.

Original Description

Andrew Slimmon, Morgan Stanley Investment Management senior portfolio manager, joins 'Squawk Box' to discuss the latest market trends, impact of the Iran war, oil price outlook, and more.