Morgan Stanley's Andrew Slimmon advises investors to prepare for a short-term US stocks pullback and be ready to buy when fear peaks. His recommendation comes as the S&P 500 approaches its best month in over five years, despite Tuesday's dip following concerns about AI spending at OpenAI. The strategist points to a collision between strong earnings backdrop and mounting geopolitical risks.

Slimmon warns that the nearly 10% rally has left equities dangerously overstretched, with overbought levels and aggressive positioning creating vulnerability to reversal. While earnings optimism has been priced in, particularly for the Magnificent Seven, he sees healthy pullbacks as beneficial for resetting bullish sentiment. His advice: remain patient rather than deploy fresh capital at current levels.

Despite near-term caution, Slimmon remains constructive on equities long-term, citing strong earnings revisions as the key driving force. He highlights large US banks trading at notable discounts despite solid fundamentals. The main risk persists from elevated oil prices, which could slow earnings upgrades and complicate the Fed's path toward rate cuts, potentially capping further gains.