Morgan Stanley just warned that the US dollar surge creates dangerous conditions for ‘something to break’ in the financial system — here are 3 top shockproof stocks

A strong U.S. dollar is good news for those who want to travel abroad. But for the stock market — which has already plummeted this year — it could lead to further downside according to Morgan Stanley.

“The recent move in the U.S. dollar creates an untenable situation for risk assets that historically has ended in a financial or economic crisis, or both,” Morgan Stanley analysts, led by Mike Wilson, write in a recent note to investors.

Wilson’s team calculates that every 1% gain in the U.S. Dollar Index would have a negative 0.5% impact on company profits.

Year to date, the U.S. Dollar Index has surged 16.5% while the S&P 500 has tumbled 23.8%.

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The analysts also point out that this greenback strength is happening at a time when central banks around the world are tightening monetary policy, and that does not bode well for the markets.

“If there was ever a time to be on the lookout for something to break, this would be it,” they write.

Wilson’s team expects the S&P 500 to fall to a level of 3,000 to 3,400 later this year or early next year. That implies a further downside of 7.6% to 18.5%.

But that doesn’t mean selling everything. Despite the gloomy outlook, Morgan Stanley still sees upside in quite a few companies. Here’s a look at three that it finds particularly attractive.

Eli Lilly (LLY)

This American pharmaceutical giant commands more than $300 billion in market cap, with products marketed in 120 countries around the world.

Despite the market downturn this year, Eli Lilly is not a beaten-down stock.

In the first six months of 2022, Eli Lilly’s revenue grew 6% year over year. Meanwhile, the company’s adjusted earnings per share improved 12% from a year ago.

Shares are actually up roughly 17% so far in 2022, and Morgan Stanley expects the trend to continue.

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Analyst Terence Flynn has an ‘overweight’ rating on Eli Lilly and recently raised his price…