SKN | Morgan Stanley Identifies Japan and Europe as Key Equity Opportunities

Key Points

• Morgan Stanley Investment Management’s Andrew Slimmon highlighted Japan and Europe as markets where improving earnings revisions are changing the investment landscape described in the source.
• Japan’s Nikkei 225 had gained approximately 25.4% in 2026 through September 18, while the STOXX Europe 600 Banks index had risen about 18.87%.
• Morgan Stanley’s refreshed 15-stock U.S. Vintage Values list retained only Amazon, McKesson and Visa from the previous edition, with the new list emphasizing company-specific fundamentals rather than recent momentum.

Earnings Revisions Are Reshaping the Japan Narrative

Andrew Slimmon, managing director and senior portfolio manager at Morgan Stanley Investment Management, pointed to improving corporate earnings estimates as a key factor behind Japan’s equity performance in 2026.

Speaking on CNBC’s Squawk Box Asia, Slimmon said Japanese companies were increasingly revising earnings estimates upward. The source identifies this change in corporate expectations as an important distinction from earlier periods when concerns about disappointing earnings had weighed on perceptions of Japanese and European markets.

The Nikkei 225 had gained approximately 25.4% for the year through September 18, although it remained nearly 12% below its June record. For international wealth portfolios, the combination of strong year-to-date performance and the distance from the record highlights the importance of separating current earnings momentum from index-level performance.

Europe Offers More Than a Defense Trade

Slimmon identified European defense as one area of opportunity but also highlighted European banks, which had performed strongly during 2026. The STOXX Europe 600 Banks index had gained approximately 18.87% for the year according to the supplied source.

The broader argument centers on earnings revisions rather than a single sector. Slimmon said markets were increasingly responding to growth reflected in company earnings estimates, describing this as a key difference between 2026 and previous years.

For globally diversified investors, that distinction matters because improving earnings expectations can affect equity valuations independently of the headline performance of a regional benchmark.

U.S. Markets Face a Different Breadth Dynamic

Slimmon also discussed U.S. equity-market breadth, noting that a relatively small number of mega-cap companies carrying a significant portion of index performance is not necessarily negative for equities.

The Federal Reserve raised its benchmark rate by 25 basis points on September 16, bringing the target range to 3.75%-4%. According to the source, this was the first increase since 2023. Slimmon noted that the market remained around the same level as it had been in May despite the rate increase, while earnings revisions continued to rise.

Morgan Stanley’s chief U.S. equity strategist Mike Wilson provided a more cautious scenario earlier in September, warning that oil reaching $120 or higher within 30 days could drain liquidity. That view represents a separate risk framework from Slimmon’s focus on improving earnings expectations.

Morgan Stanley Refreshes Its 15-Stock U.S. List

Morgan Stanley’s strategists also refreshed the firm’s Vintage Values list, a 12-month stock selection framework. The 2026 edition returned 32.12% between September 9, 2025, and September 11, 2026, compared with an approximately 19% gain for the S&P 500 over the same period.

For the 2027 edition, strategists narrowed more than 50 analyst recommendations to 15 companies. Only Amazon, McKesson and Visa remained from the previous list. Alphabet, Apple, Coca-Cola, Dynatrace, Eli Lilly, Equinix and Williams Companies were among the additions cited in the source.

The list’s stated positioning is important for wealth investors: strategist Michelle Weaver described it as having an “anti-momentum” tilt, emphasizing bottom-up company fundamentals rather than stocks that had simply performed well recently.

Closing Insights

The Morgan Stanley framework presented in the source places earnings revisions at the center of the current regional equity discussion. Japan’s improving corporate expectations, Europe’s banking and defense exposure, and the U.S. focus on company-specific fundamentals represent distinct portfolio considerations rather than a single global equity narrative. For internationally diversified wealth portfolios, monitoring earnings revisions alongside valuations, rates and liquidity remains central to assessing how regional opportunities evolve.

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