In its latest outlook, Morgan Stanley Investment Management argues that the 10-year US Treasury yield near 4% may understate the US economic growth trajectory. The note points to constructive tailwinds for 2026, with activity proving resilient and inflation dynamics remaining stubborn. That mix suggests stronger growth could keep the Federal Reserve from delivering aggressive rate cuts, aligning policy with a pace slower than currently priced by markets over the next 12 to 18 months.

Consequently, the firm has adopted an underweight stance on US bonds, highlighting a shift in duration risk and income prospects. The call underscores how the macro backdrop may influence risk assets beyond fixed income and guide asset-allocation decisions for diversified portfolios.