About Michael Wilson
Mike Wilson, Morgan Stanley's chief U.S. equity strategist and chief investment officer, has maintained a bullish outlook on the stock market through mid-2026, describing the current period as an earnings-driven bull market. He stated that the market has "moved past" the U.S.-Iran war, comparing it to how investors previously moved past tariffs, and argued that a stable resolution in the Middle East could lead the bond market to walk back priced-in Federal Reserve rate hikes. Wilson characterized recent market volatility as a "summer chop" and a rotation, not the end of the bull market, and said he expects stocks to rise into year-end. He noted that the next phase of the bull market typically involves flat-to-down multiples with earnings driving gains, and that a rotation into areas such as consumer, transportation, and regional bank stocks is underway.
Wilson also addressed risks to the market, including the transition at the Federal Reserve. He said that new Fed chair Kevin Warsh has described himself as a "balance sheet hawk," and that if he follows through on reducing the balance sheet, that could pose a "bigger risk" for markets. Wilson added that the liquidity picture is "deteriorating" and that the Fed's meeting would be important for managing liquidity. On oil prices, he stated that $126 per barrel is "not manageable" and that if prices stay at that level for three to four months, it would likely cause a 10% hit to U.S. earnings growth and push the stock market lower. Regarding artificial intelligence, Wilson described it as a capex cycle and predicted a 30 to 50% drawdown in related stocks at some point, though he said the long-term cycle remains intact.
Source: AI-verified profile updated from Michael Wilson's recent appearances.
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✨ AI-enhanced transcript with speaker attribution
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Interviewer0:00
Even if we claw back some of the losses today, we're still seeing this rotation. It looks like maybe out of tech into something else, or maybe it's investors freeing up cash for big IPOs. How do you explain the drops we've seen today, yesterday, and especially on Friday?
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Michael Wilson0:16
Yeah, I think so. First of all, we've had this concentrated market in the last month, and it's part of this rotation that's been going on all year from one cyclical group to the next. I would actually say it's from one commodity to the next. We can go through that in a minute. So what happened last week, and we wrote about this in pretty good detail, is that the earnings revisions that we've been probably the most bullish on, I think, than anybody this year have even exceeded our expectations. They've gotten to a point now where the revision breadth, the leading indicator second derivative, is at a level that's unsustainably high. I'll give you an example. Semiconductor revision breadth comes to 70%. It's only happened three or four times in the last 25 years. The S&P 500 revision breadth is close to 30%, also very high. So it's going to roll over. Last week, a couple of companies reported in the semiconductor industry. They were fine, but the revision breadth started to roll over. So it's a second derivative, and there's leverage in the system in that trade, and that's starting to unwind a bit. To me, there's going to be a transition now to some new leadership.
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Interviewer1:15
Alright, maybe it's a little too much math for my brain, but I was looking at earnings revisions. Since last time you were on, you pointed out they were pretty much convex, right? Just continued to climb. We have a chart of that, and we'll probably pull it up in a second. It looks like we're getting near a plateau at least for 2026 earnings revisions, which I guess makes sense. What do you make of that? How much longer can we continue to head upwards with earnings revisions? And what do you mean by revisions breadth?
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Michael Wilson1:48
Yeah, so revision breadth is just the breadth of the revisions as opposed to the absolute level, and it leads the second derivative, the rate of change on the actual growth. So I do not expect the first derivative, i.e., the forward earnings growth, to come down or fall. We're showing it here in white for 2026, in blue for 2026. So that white line is going to continue to go, but the revision breadth is rolling over. So there's a deceleration, a second derivative, which is what the market's picking up a little bit. That's a correction, not a change in the trajectory. As we go forward into next year, that NTM forward earnings is going to continue to rise, and that's our call. That's why stocks continue to rise into year end. Multiples don't have to rise. It's just you move forward into 2027 as you look forward for 12 months. But the rate of change matters in the short term, and that's what's going on right now. To me, that's going to lead to some leadership change just like it did earlier in the year when we went from gold and silver stocks to metals to energy, and then we went into DRAM and semiconductors. By the way, all four of those are commodities.
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Interviewer2:46
I see. Yeah, because you said earlier we're going from one commodity to the next. That's right. But semiconductors, DRAM, high bandwidth DRAM is the hot commodity of the moment. Are we going to shift out of that into something else?
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Michael Wilson2:59
Well, it's happening. Friday's sell-off is a sign that that's exhausted. We did a chart this week that was pretty interesting. We looked at silver stocks versus semiconductor stocks, and it's right on top of each other. We made this call at the end of January. We said gold's probably going to go down 30%, and that would be normal. That's what I would like to see because you can't stay at that pace. To your point, you can't stay at that rate of change, both on price of stocks or the revisions. The key is, is there a place to rotate to that the market can kind of hold in? We think there is, and we've highlighted that as consumer, some of the other industrial areas like transportation stocks, and even the regional banks. By the way, all three of those areas were up yesterday in a down tape.
