Morgan Stanley Managing Director, Lisa Shalett believes the US equity market is fighting the Fed, ignoring leading economic indicators, and that could mean pain for overly optimistic positions.

What are the biggest inconsistencies right now in markets? And I ask this because a lot of people have been saying that bond markets are hearing what Fed Chair Jay Powell is saying. The actual words, whereas stock markets are just hearing that he said disinflation a couple times. Yeah. I couldn't agree more. You know, to us, the U.S. equity market is fighting the Fed big time. There are some major disconnects in how the equity market is positioning itself. We saw, you know, a huge short covering rally. We saw. We saw, you know, a low quality dimension to the rally. And now most recently, we've seen cyclicals outperforming more defensive stocks. What's precarious about that is that we have almost all the cyclical linked indicators, meaning recession linked indicators like the index of leading economic indicators, which has really plummeted and yet it's disconnected from this cyclical outperformance. So, you know, I've heard the theories that people say, yes, we understand what's what should happen, but we're going to look through it. I don't know how far their crystal ball goes to look through it, but history is not kind to these kind of, you know, massive disconnects.