“While [second-quarter] earnings season should come in better than expected, we do not see it as a positive catalyst for the U.S. equity market. Our defensive rotation call last week was met with a big yawn. We reiterate the call today with increasing conviction,” the firm’s chief U.S. equity strategist, Mike Wilson, wrote in a note Monday. “We think the current level of growth boosted by a one time tax benefit is likely to fall significantly,” Wilson added. Morgan Stanley says it thinks the forward guidance for companies will “matter more than the prints.” Wilson perceives a shift in the market, saying the market is now focused “on sustainability of growth.” He says his call is based “in a poor relative risk-reward headed into earnings.” “This quarter may be when that risk gets priced,” Wilson said. Wilson explained that his call is “anticipatory,” saying his analysis is not based on “a smoking gun” for why a strong market would suddenly head lower. Morgan Stanley is looking at the combination of “the technical evidence” for a downturn alongside numerous other issues, the note says, from “trade escalation” to “relative valuations.” “We struggle to see how this earnings season will act as a positive catalyst when an exceptionally strong [first-quarter] reporting season did not,” Wilson added. Investors should look to move away from stocks in the technology and financial sectors, Wilson said, even though they have been “the biggest drivers of earnings growth” over the last few quarters. Instead of betting on that growth to continue, Wilson says investors should consider moving toward sectors such as materials, telecommunications and utilities. “Tech and growth stocks are probably the most vulnerable to a significant drawdown during what is typically the weakest season of the year,” Wilson said.