Morgan Stanley says commodities are an 'interesting exception' and will lag stocks next year

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A BHP Billiton Ltd. freight train carrying iron ore travels along a rail track towards Port Hedland, Australia.
Ian Waldie | Bloomberg | Getty Images

Morgan Stanley has encouraged investors to "keep the faith" and "trust the recovery" next year, saying 2021 will most likely be defined by a return to more normal economic conditions.

Nonetheless, the Wall Street bank's chief cross-asset strategist believes investors should prioritize exposure to stocks and credit over commodities, which he described as an "interesting exception."

Speaking to CNBC's "Squawk Box Europe" on Friday, Morgan Stanley's Andrew Sheets explained trends that had been "historically wonderful" for commodity bulls were unlikely to be as supportive in the first half of next year.

"Bottom line, I think you have a market next year that is going to have a good fundamental and earnings story, still a good liquidity story, and a reasonable enough valuation story that it won't stop that, and yes, that is ultimately why we do think next year will be a pretty reasonable year for markets," Sheets said.

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