But this idea is challenged by Morgan Stanley's view that earnings -- the long-term driver of equity returns -- are slated to remain subdued. In the meantime, there's a new TINA in town.
"The flatness of the [expected efficient] frontier means that the optimal portfolio will lie near the left-hand extreme of the red line for a variety of investor utility functions," explained Sheets, which in effect, equals greater exposure to credit. "Relative to prior later-cycle periods, growth looks weaker, central bank policy looks looser, and credit risk premiums are more elevated."
Credit spreads -- from U.S. investment-grade to European high-yield -- are also above their historical norms, the strategist observed, effectively already pricing in the odds of rising defaults and vanishing liquidity.
"Our equity forecasts reflect mild earnings growth and no multiple expansion, hardly a cataclysm," concludes Sheets. "But this view needs to be respected. If we are expecting, at best, average-looking returns, it seems reasonable to run more average-looking equity weightings."