Morgan Stanley’s Zavolock Says Rally a Chance to Ditch Cyclicals

Thursday’s jump in European stocks should be used to reallocate funds from cyclicals to defensives, according to Morgan Stanley’s Marina Zavolock, who sees downside risks persisting despite Donald Trump’s announcement that he’s pausing most tariffs.

Bank stocks led the charge on Thursday, pushing the group back to pole position as Europe’s top-performing sector this year. Lenders had been “trading for some time like a one-way train” and not reflecting recession risks, according to Zavolock, Morgan Stanley’s chief European equity strategist.

“At this point in the cycle — where we have much more late-cycle dynamics — we think banks ...