Morgan Stanley believes U.S companies are facing an inventory problem — and it's a key risk to earnings.
"The problem with inventory is two-fold: supply chain bottlenecks are clearing while demand, especially demand for goods, is slowing," Morgan Stanley strategists led by Michelle Weaver and Mike Wilson wrote in an Oct. 10 note.
Morgan Stanley believes the inventory problem has now become a risk to earnings, with oversupply and lagging demand likely to weigh on companies' margins.
However, although a broad problem for the market and for goods producing industries in particular, not all industries are impacted to the same degree, according to Morgan Stanley.
The bank found that tech hardware and consumer retail companies are among the most at risk from excess inventory.