Morgan Stanley strategist Mike Wilson reiterated his bullish stance on U.S. equities in a word Monday, stating that the financial institution could be patrons into any market weak point, regardless of expectations of a modest third-quarter pullback, News.az experiences citing Investing.
“We’ve been bullish for the last few months primarily due to the V-shaped recovery in EPS revisions breadth,” Wilson wrote in a brand new word.
He mentioned April’s “Capitulation Day” and “Liberation Day” marked the top of the bear market that started in 2024 and ushered in a brand new bull market, now 4 months outdated.
While Friday’s comfortable labour report and a Federal Reserve nonetheless on maintain might set off a short-term consolidation, Wilson mentioned, “We’re buyers of pullbacks and bullish next 12M.”
The current employment knowledge, together with “the lagging 2-month payroll net revision,” was the worst because the early Covid lockdowns, underscoring that “stocks bottom on bad news.”
Wilson cautioned that “bull markets do see pullbacks,” and famous the third quarter’s seasonal weak point, together with “lagged impacts of tariffs on growth data” and inflation issues, could create circumstances for a near-term correction.
However, he sees any such decline as short-term. “Friday may be all we get to the downside for now,” he wrote.
Looking additional out, Morgan Stanley is “gaining confidence in our 12-month bullish view,” supported by constructive working leverage, AI adoption, greenback weak point, OBBBA tax financial savings, and simple comparisons.
The agency expects that “fading inflation” and a softer labor market will finally enable the Fed to start fee cuts, doubtlessly by the fourth quarter.
“In our view, the rolling recovery has begun,” Wilson acknowledged. “The combination of a fading inflation impulse later this year plus softness in the labor market should foster a robust cutting cycle. The equity market is likely to digest Fed cuts more directly starting in 4Q of this year, if not sooner, should the data support a Fed pivot.”
