Morgan Stanley warns of hit to equity valuation if US fiscal spending is cut

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Morgan Stanley cautions that the high valuation of US equities may be affected if aggressive fiscal spending is reduced, following the downgrade of sovereign debt by Fitch. The brokerage highlights the significant fiscal stimulus implemented in response to the COVID-19 pandemic, which has allowed the US economy to outperform expectations. Despite the Federal Reserve's rapid interest rate hikes, some Wall Street strategists anticipate a continued rally for certain US stocks.