CNBC Television Sep 18, 2026
With Katerina Simonetti, Executive Vice President at Morgan Stanley Private Wealth Management
The rate-hiking cycle could end much sooner than the market expects, Katerina Simonetti said, if the Strait of Hormuz situation is resolved and the oil price falls.
Most of the argument about equities right now runs through the Federal Reserve. Simonetti puts the Fed downstream of something else, and says the variable to watch is crude.
"In our view, it's not the story of the rates. It's a story of the price of oil and inflation."
Simonetti builds allocations for private clients at Morgan Stanley, which means she has to answer the question of how much technology a portfolio should hold at a moment when owning the index alone already makes it overweight. She was introduced as thinking the market is expensive, potentially brutal and too concentrated, and constructive anyway.
The full segment is covered here so you can skip it.
Here are the 5 calls that matter.
Key Takeaways
The hiking cycle could finish much sooner than expected if oil comes down on a Strait of Hormuz resolution; if it does not, equities are at risk
Technology's problem is concentration, not valuation — the valuation she treats as settled
Her instruction to clients is to stop chasing the mega performers and know what they own
The money is moving from AI enablers to AI implementers, so the question is which technology, not how much
She does not like cash, but she does like three-month, six-month and one-year paper now that it pays
1. Expensive Is the Reality
Asked how she can call the market expensive, potentially brutal and too concentrated and still be constructive, Simonetti started with the whipsaw in sentiment.
The debate itself is the noise
We love AI, we hate AI, we love data centers, we hate data centers.
Katerina Simonetti
What she tells investors instead
I think that the one constant that investors need to focus on is that this is our reality, and we have to function in it.
Katerina Simonetti
Inside that uncertainty and those valuations, she said, the job is to find value and quality together. The diversification she wants is wider than a sector split.
Diversification runs inside technology too
And it's this quality and broadening diversification not only within sectors or regional, but also within technology itself.
Katerina Simonetti
That, on her account, is what carries a portfolio through the volatility and leaves it able to take the opportunities.
2. Don't Chase the Winners
Asked which sectors are most overvalued, Simonetti did not argue about technology's multiple. It is overvalued, she said, and the risk that matters is how few names the enthusiasm is attached to.
The instruction to clients
What we tell investors is that this is not the time to chase these mega performers. This is the time to know what we own.
Katerina Simonetti
Selectivity applies across technology, financials and healthcare alike, and the test she named is a specific one.
What she screens for
It's owning companies that are positioned for durable growth and that also have the trend not only to show positive earnings, but also have positive earnings revisions and have this competitive positioning.
Katerina Simonetti
3. Enablers to Implementers
The host pressed for a number: with the S&P 500 at roughly 40% technology on his count once Amazon and Meta are added, how much technology should a private client hold? Simonetti declined the framing.
The weighting is the wrong question
And I think it's not as much about the weighting. It's about what we own, because we're going from the AI enablers to AI implementers.
Katerina Simonetti
And owning tech is fine
We're looking at this monetization story. So it is okay to own tech.
Katerina Simonetti
If it is acceptable for the index to be overweight technology, she said, it is normal for an investment portfolio to hold a good amount of it. The work is the composition: software against semiconductors, the companies using AI against the ones that will decide how healthcare, financial and industrial companies use it.
Her definition of diversified
Is being diversified not broadly as a general term, but being diversified within technology and within each sector.
Katerina Simonetti
4. Oil, Not Rates
The host's question was whether one hike is absorbable or whether this turns into 2022, when a run of hikes hurt equities. Simonetti agreed it is a concern and then split the difference.
No repeat of 2022, but data dependent
It absolutely is a concern. While we don't see a repeat of 2022 where there's going to be this broadening hike cycle, this is definitely going to be data dependent.
Katerina Simonetti
Where she puts the causation
In our view, it's not the story of the rates. It's a story of the price of oil and inflation.
Katerina Simonetti
Several things feed the Fed's decision, she said, including that the Fed does not necessarily believe inflation is heading back to its 2% target, and there is a great deal of geopolitical risk sitting on top of that.
The bull case is a geopolitical one
So assuming that the Strait of Hormuz situation gets resolved and we get some positive development and the price of oil starts coming down, maybe we're going to see the end of the hiking cycle way quicker than we think.
Katerina Simonetti
She was equally direct about the other branch.
And the bear case
But if it doesn't happen, it absolutely presents risks to equities. This is going to affect them in a negative way.
Katerina Simonetti
5. Yield at the Front End
Asked about cash, Simonetti corrected the word.
Not cash, short-dated bonds
I wouldn't say I like cash, but I love the fact that we can now invest in short term bonds.
Katerina Simonetti
What she is actually buying
We can invest in three month paper, six month paper, one year, in municipal bonds, in corporate bonds, and actually get some yield out of it.
Katerina Simonetti
She called it making lemonade out of lemons, and named the cost on the other side: existing bond portfolios feel the pressure of higher rates even as new money earns more.
Bonus Insights
The host made an observation about the job rather than the market. Refusing to lean heavily into any one thing is not hedging or evasion, on his reading; it is what wealth managers are for, and he called it the smart posture. He also allowed that every client carries a different risk profile, which is why Simonetti's answer on technology weighting was a range of questions rather than a percentage.
Simonetti's bottom line is that the market's valuation is settled and its concentration is not, that the next move in rates is a function of the oil price rather than the Fed's own intent, and that a private portfolio should be diversified inside technology rather than away from it.
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