Lisa Shalett Talks Oil Shocks to Equities, Thematic Investing

Summary

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Podcast Summary: Bloomberg Talks — "Lisa Shalett Talks Oil Shocks to Equities, Thematic Investing"

Date: March 11, 2026
Host: Tom Keene, Nathan Hager (Bloomberg)
Guest: Lisa Shalett, CIO of Morgan Stanley Wealth Management

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Episode Overview

In this episode, Lisa Shalett discusses the unprecedented resilience of U.S. equities amid ongoing global military conflicts and oil shocks. The conversation explores the complexities of investing in today's market, thematic investing trends, and the shifting dynamics of global opportunities—particularly between Latin America and Asia. The dialogue is rich with insights into risk management, the resurgence of stock picking, and the critical importance of profitability in today’s market, all delivered in Shalett’s candid, analytical style.

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Key Discussion Points & Insights

1. Complexity & Hyper Vigilance in Markets

• Market Complexity: Shalett highlights that current market conditions are unusually complex due to geopolitical risks involving multiple countries and significant moves in energy reserves policy.
  • "Our watchword right now is hyper vigilance... We've had extraordinary dispersion of individual stock performance." (Lisa Shalett, 01:01)
• Investment Planning: She emphasizes that there is no single investment plan that fits all; rather, investors must remain flexible and extremely vigilant.
  • "You can't sustain one plan. You can't be anchored... Hyper vigilance is one way to plan." (Lisa Shalett, 01:01)
• Under-pricing of Risk: Shalett notes concern over the low risk premium being priced into the markets despite heightened geopolitical risks.
  • "We're marveling at how little risk premia is really being priced into this market, given the complexity." (Lisa Shalett, 01:33)

2. Impact of Military Conflict and Energy Policy

• Global Tension: Shalett draws parallels to world wars, noting the scale of current military involvement and rapid policy responses.
  • "Not to, you know, venture into hyperbole, but, you know, this is... the closest in my lifetime [to a world war]." (Lisa Shalett, 01:44)
• Oil Shocks: She comments on the IEA's aggressive release of energy reserves.
  • "...IEA in particular, you know, going out after, you know, 25 to 30% of reserves, 10 days in. That means you only have two thirds left." (Lisa Shalett, 02:47)

3. Opportunities and Caution in Technology & AI

• Tech Landscape: Discussion of opportunities within tech, specifically the cyclical nature of semiconductors and valuation mismatches.
  • "We're picking through, you know, some of the software, we're funding it from some of the semiconductor makers... Semiconductors are actually cyclical and typically trade on normalized earnings, not peak earnings." (Lisa Shalett, 03:10)
• Assessment of Opportunity: Shalett doesn't call this "the mother of all opportunities" in AI/software, referencing 2022 as a better moment due to broad selloff.

4. Investor Sentiment: Institutional vs. Private Wealth

• Cautious vs. Aggressive Positioning:
  • Private Wealth & Family Offices: Tending towards defensiveness and holding more cash.
  • Institutional Investors: More willing to take risk, betting on AI-driven profit acceleration.
  • "Much more defensive... about being defensive, about having some cash on the sidelines. But you know, the more institutional folks... still have some animal spirit." (Lisa Shalett, 04:05)

5. Thematic Investing & the Reality of Small Cap Growth

• Theme Stocks & Venture Focus:
  • "We are fundamental believers in thematic investing... But what we're doing is we're trying to access those opportunities more in venture capital today and in growth private equity than we are in the public markets." (Lisa Shalett, 05:11)
  • Public small cap companies, especially in the Russell 2000, are criticized for poor profitability.
  • "Public small cap, we believe is really experienced adverse selection... lack of profitability in the Russell 2000... is just so uninspiring." (Lisa Shalett, 05:45)
• Profitability Emphasis:
  • "Profit is everything." (Tom Keene, 05:49)
  • "The real companies, the real profit-oriented... they're not publicly traded." (Nathan Hager, 06:02)

6. Do Equities Rise During War?

• Historical Perspective:
  • Tom Keene references WWII market data; Shalett explains wars are generally "reflationary."
  • "Wars get economies moving and doing things." (Lisa Shalett, 06:48)

7. Emerging Markets: Latin America vs. Asia

• LatAm Advantage:
  • Shalett advocates for Latin American opportunities, citing U.S. supply chain development and business-friendly policy shifts, which are reinforced by current energy dynamics.
  • "The new Monroe Doctrine or new implementation of it... creates backing for a more business centric... and less progressive governments... attracting investment that is sponsored by U.S. development of supply chains." (Lisa Shalett, 07:33)
• Energy Import/Export Dynamics:
  • Asian economies as net oil importers are at a disadvantage in the current environment compared to resource-rich Latin America.

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Notable Quotes & Memorable Moments

• On Flexibility:

  • "You can't sustain one plan... Hyper vigilance is one way to plan." (Lisa Shalett, 01:01)

• On Market Risk:

  • "We're marveling at how little risk premia is really being priced into this market, given the complexity." (Lisa Shalett, 01:33)
  • "This is the closest in my lifetime [to a world war]." (Lisa Shalett, 01:44)

• On Profit:

  • "Profit is everything." (Tom Keene, 05:49)
  • "The real companies, the real profit-oriented... they're not publicly traded." (Nathan Hager, 06:02)

• On Equities Amid War:

  • "Wars get economies moving and doing things." (Lisa Shalett, 06:48)

• On Shifting Global Focus:

  • "The new Monroe Doctrine or new implementation of it... attracting investment that is sponsored by U.S. development of supply chains." (Lisa Shalett, 07:33)

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Important Timestamps

• 01:01 – Shalett on hyper vigilance and current market complexity
• 01:33 – Under-pricing of risk in equities
• 02:47 – IEA’s energy reserves release
• 03:10 – Tech opportunity assessment and semiconductor cycle
• 04:05 – Private vs. institutional investor behavior
• 05:11 – Thematic investing, venture capital over public markets
• 05:45 – Lack of profitability among public small caps
• 06:48 – The historical pattern of equities during wartime
• 07:33 – Latin America focus and U.S. supply chain policy

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Takeaways

• Lisa Shalett urges hyper vigilance and adaptability in investment strategies amid high geopolitical and macroeconomic complexity.
• She underscores the importance of focusing on profitability, particularly as small cap public markets lag in this respect.
• Shalett recommends thematic investing via private markets and expects Latin America to benefit from global supply chain realignment and U.S. policy shifts.
• Wars and crises, while creating volatility, historically have reflationary impacts and long-term equity upside—but prudent risk management is essential.

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Transcript

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[Nathan Hager]

Bloomberg Audio Studios podcasts

[Tom Keene]

Radio news Lisa Shallot has been around the block 14, 15 times. She was 14 years old. She was at Alliance Bernstein working for Sandy Bernstein years ago. Drives a ship at Morgan Stanley. What I love about your note is you say, get over it. It's a complex situation. How do you sustain an investment plan given legitimate complexity?

[Lisa Shalett]

I think you can't sustain one plan. You can't be anchored where, you know. Our watchword right now is hyper vigilance. One of the things that has been very interesting to us, that has differentiated 2026 from, from, you know, really the first three years of this bull market has been underneath the surface of the index. We've had extraordinary dispersion of individual stock performance. So if you're a stock picker, which I grew up being and haven't really been able to do for the past 15, 17 years, this is, you know, Christmas and there's lots and lots of things to do below, below the surface. And so hyper vigilance is, is one way to plan. But I think the second element of this, Tom, is that, you know, we're marveling at how little risk premia is really being priced into this market, given the complexity. I mean, not to, you know, venture into hyperbole, but, you know, this is a situation that is currently militarily involving 13, 14 different countries. Now, I don't want to say the words world war, but, you know, this is the closest in my lifetime. And so to me, you know, you know, putting that complexity together with the fact that we're now seeing, you know, from the policy side, what feels to me like not just a response, but almost a panic in terms of the. The global desire to release energy reserves and the IEA in particular, you know, going out after, you know, 25 to 30% of reserves, 10 days in.

[Tom Keene]

Yeah.

[Lisa Shalett]

That means you only have two thirds left.

[Tom Keene]

The heritage of Morgan Stanley starts with a woman named Mary who used to put out a deck, 80 pages. I hated her. You had to read every page of it. You people own the analysis of technology, particularly on The Left Coast. Is this the mother of all opportunities in a software AI scare?

[Lisa Shalett]

I don't know that I call it the mother of all opportunities. I mean, 2022, the sell off in 2022 is a pretty good opportunity because that was so focused on technology. But there are a lot of things to do and we are, you know, picking through the rubble. We're picking through, you know, some of the software, we're funding it from some of the semiconductor makers. In fact, you know, I'm trying to remind people that semiconductors are actually cyclical and typically trade on normalized earnings, not peak earnings. People.

[Nathan Hager]

Lisa, you are the CIO of Morgan Stanley Wealth Management and you just wrote that US Equity resilience in the face of war and oil shocks is largely unprecedented. Such as, like we're seeing, and you're going back at least 80 years here. I mean, the investors you're talking to, do you find more of them interested in bargain hunting in the current environment or looking to put on protection or looking for safe haven, places to hide in the current environment? What have your conversations with clients been like?

[Lisa Shalett]

So it really depends on where you sit. For much of our private wealth, business, family offices, ultra high net worth individuals, they're much more defensive, they're much more concerned about, about, you know, risk premium, about being defensive, about having some cash on the sidelines. But you know, the more institutional folks have, still have some animal spirit here and you know, have kind of deep belief that this is going to be over quickly and that the underlying fundamental story of profit acceleration because of AI still lives.

[Nathan Hager]

So what about some of these, I'm going to go there, Quantum computing, bitcoin mining, flying taxi companies, new energy, all these kind of, you know, small cap growth stocks, all these meme themes. What are your thoughts there? I mean, do you still tell investors, hey, you know, you want to, you know, you have to be exposed in order to benefit from it, right? I mean like, is it, is it a non, non zero probability that you're basically telling Invest, hey, you know, you can't just run and hide from some of these, some of these sectors.

[Lisa Shalett]

So absolutely, we are fundamental believers in thematic investing. I know, you know, Tom has my colleague Ellen Zentner on very often and she's, she's running thematic for us. But what we're doing is we're trying to access those opportunities more in venture capital today and in growth private equity than we are in the public markets. What we've said is that public small cap, we believe is really experienced adverse selection that the Level of the lack of profitability in the Russell 2000, for example, is just so uninspiring.

[Tom Keene]

I'll say. My book, folks, listen carefully to what Michelle just said. Their profit is everything. Yeah, this is from Magdalene. The late Magdalen Lord decide at lsc.

[Nathan Hager]

Well, I guess what we're saying is that in some of those sectors, Tom, you know, the real companies, the real profit orient, the ones who are actually making money and are going to benefit, they're not publicly traded.

[Tom Keene]

This came up in Phoenix with Cam Dawson the other day. Great panel. I'm sorry, profit matters. It's all there is to it. So here's what I did, Lisa. I did this just for you. I pulled up the dow. It's a wins award chart. Herman Vo okay, 1939 all the way out to 1946. I've lectured about the Guadalcanal Low of 1942, the absolute bottom of a horrific war, and then a moonshot for equities off of 1942. Do stocks go up in war?

[Lisa Shalett]

It depends, but I think, look, fundamentally, yes. You know, fundamentally wars are reflationary. Right. Whether we're talking about, you know, just a world based on the inflation and the nominals, or we're talking about defense spending and quote unquote, the military industrial complex, wars get economies moving and doing things.

[Nathan Hager]

Well for our audience, if you ever have the benefit of reading Lisa Shallet's work, you know you're going to see that she knows everything from equities to fixed income to commodities, you name it. But hidden within her note is a little bit on emerging markets, Tom, and she is suggesting that investors focus on Latin America as opposed to Asia. And I'm curious, is that more driven by what's going on in the energy markets? The fact that Asian economies tend to be oil importers, or is there something else there?

[Lisa Shalett]

So there's something else going on. Certainly the oil and energy dynamics have reinforced that dichotomy between Latam and Asia. But what had gotten our attention really is, you know, the change in US policy to the extent that, that, you know, the new Monroe Doctrine or new implementation of it, that that creates backing for a more business centric or, or business oriented and less progressive governments down there that are stable, that are, are attracting investment that is sponsored by U.S. development of Supply chains. That's a good thing. And you know, that's part of our thesis of why you should be looking down there.

[Tom Keene]

Lisa, thank you so much for coming and really appreciate the student.

[Lisa Shalett]

My pleasure.

[Tom Keene]

Iconic at Morgan Stanley, Lisa Shallot driving all of their wealth management work here.

[Lisa Shalett]

Bloomberg Daybreak is your best way to get informed first thing in the morning, right in your podcast feed. Hi, I'm Karen Moscow.

[Nathan Hager]

And I'm Nathan Hager. Each morning we're up early putting together the latest episode of Bloomberg Daybreak US Edition. It's your daily 15 minute podcast on the latest in global news, politics and international relations.

[Lisa Shalett]

Listen to the Bloomberg Daybreak US Edition podcast each morning. For the stories that matter with the context you need, find us on Apple,

[Nathan Hager]

Spotify, or anywhere you listen.