Morgan Stanley’s Wilson: Stocks Likely to Have Hit Bottom

• Morgan Stanley’s (MS) Chief Equity Strategist Mike Wilson maintains a 12-month S&P 500 (SPX) target of 6,500 points, implying an 8% gain, and believes trade issues with China won’t derail market momentum unless tensions re-escalate significantly.
• Wilson advises focusing on improving economic data over noisy headlines, noting the market bottomed post-Liberation Day, but acknowledges risks of a weaker Q2 and a potential 5 to 7% correction if rates exceed 4.5% or earnings disappoint.
• He dismisses expectations of a 10 to 15% drawdown, urging investors to act proactively based on historical patterns, as the market navigates potential summer weakness and trade uncertainties.

Morgan Stanley (MS) Chief Equity Strategist Mike Wilson, appearing on “Bloomberg Surveillance,” maintains a cautiously optimistic outlook for U.S. equity markets, asserting that unless the trade war with China re-escalates significantly, trade issues are unlikely to derail current stock market momentum. In a recent note, Wilson reiterated his 12-month price target of 6,500 points for the S&P 500 (SPX), suggesting an approximate 8% gain from current levels, reflecting his belief that the market has already absorbed much of the earlier volatility tied to trade tensions. He advises investors to focus on improving economic data rather than headline noise, noting that the market bottomed out post-Liberation Day due to a violent deleveraging, with subsequent data inflection points supporting a more positive trajectory.

Wilson acknowledges the bearish perspective that recent earnings and economic data may have been flattered by a pull-forward effect from the first quarter, potentially leading to a weaker second quarter and a bill due later this summer. He concurs that Q1 outperformed expectations due to downward revisions, but anticipates Q2 will face softer results, identifying key risks such as interest rates exceeding 4.5% or disappointing earnings that could trigger a 5 to 7% market correction. Despite this, he dismisses the likelihood of a desired 10 to 15% drawdown sought by some investors to increase exposure, emphasizing that historical patterns suggest such significant declines are less probable, urging a more proactive investment approach.

The strategist’s perspective aligns with broader market dynamics, where trade uncertainties with China have been a persistent concern, yet resilience in corporate earnings and economic indicators has sustained momentum. Wilson’s focus on data-driven insights over speculative headlines reflects a disciplined approach, informed by decades of market cycles where short-term volatility often fails to derail longer-term trends. As the market navigates potential summer weakness and interest rate pressures, his 6,500-point target underscores confidence in underlying growth, provided trade tensions do not deteriorate, positioning investors to adapt swiftly to evolving conditions rather than awaiting exaggerated downturns.

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