Episode summary
The Market Is Entering a New Cycle - Morgan Stanley's Mike Wilson
The Meb Faber Show
· · 45 min · Hosts: Meb Faber · Guests: Mike Wilson
Summary
Mike Wilson argued that the post-pandemic market is moving from a “rolling recession” into a “rolling recovery,” with different sectors bottoming at different times rather than all at once. He said the 2025 market low was tied to a government-sector recession, and that the rebound has broadened beyond mega-cap tech into small caps, equal weight, cyclicals, and parts of international markets.
He also said the current set of risks is shifting. AI is starting to hit labor-intensive software and business-services names, private credit is showing weakness, and the Iran conflict has become the latest macro shock. Still, he thinks the U.S. economy has enough buffers — including tax refunds, capex, and energy resilience — to avoid a hard landing unless oil stays above roughly $120 a barrel globally for an extended period.
On portfolio construction, Wilson argued that the old 60/40 mix is giving way to something closer to 60/20/20, with gold and other hard assets taking a larger role. He framed the era as more like the 1940s and 1950s than the disinflationary 1990s, meaning hotter but shorter cycles, more inflation sensitivity, and a need to be more tactical across equities, bonds, and alternatives.
Key takeaways
- Wilson says the market has shifted from a broad recession to a staggered recovery, and he thinks the April 2025 washout largely priced it in.
- He favors broadening equity exposure away from market-cap-weighted mega caps and toward equal weight, S&P 600 small caps, cyclicals, and select financials.
- He sees AI as a growing disruptor for software, business services, and parts of healthcare, but a potential tailwind for AI adopters and biotech discovery.
- Wilson thinks the Iran shock is serious but unlikely to force a U.S. recession unless oil remains above about $120 a barrel globally.
- He views gold as a bigger strategic asset than in the past and says a 60/20/20 framework may fit the new inflationary regime better than 60/40.
Notable quotes
“We kind of invented that term because we were trying to figure out how to explain what was going on, you know, post the pandemic”
“we're in now what I call a rolling recovery where not every sector is participating as much”
“I don't think we have to have a recession this time because the underlying strength in the economy is much better going into this war”
“I still favor S&P 600 as opposed to the Russell 2000”
“What this looks like in the 40s and 50s was you had these hotter but shorter economic cycles”
How the episode opens
Welcome to the Met Favor Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Met Faber is the co-founder and chief investment officer at Camry Investment Management. Due to industry regulations, he will not discuss any of Camry's funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Camrian Investment Management or its affiliates. For more information, visit cambrianvestments.com.
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Today we have one of our favorite guests back on the show. We're lining up for Michigan verse UVA preview. Our guest today is Mike Wilson, chief US equity strategist and chief investment officer for Morgan Stanley.
Mike, welcome back to the show.
Thanks, man. Great to see you. — Last time we spoke a couple years ago, as always, been a little crazy time in markets and was reading some of your pieces, I thought we'd start with this concept you've been talking about quite a bit lately that I think the phrase is now a bit common now.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- rolling recession
- small caps leadership rotation
- ai disruption risks
- private credit weakness
- portfolio allocation 60/20/20
Companies and tickers mentioned
- Morgan Stanley
- Alpha Architect
Watch the episode
Watch “The Market Is Entering a New Cycle - Morgan Stanley's Mike Wilson” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Meb Faber Show, this episode and its artwork belong to The Idea Farm. Octagon is not affiliated with the show; this page is an independent summary.
