Episode summary
A Stock Market Bottom in Sight
Thoughts on the Market (Morgan Stanley)
· · 5 min · Hosts: Mike Wilson
Summary
Mike Wilson argues that the current equity correction is probably closer to ending than beginning because the market has already absorbed much of the bad news around the midterms, weak breadth, and tighter Fed policy. He says the S&P 500 has moved toward his 7100 to 7,300 support range, while semiconductors are about 40% off their June highs and nearing downside targets. He still allows for one more retest of recent lows, but thinks investors should not wait for a perfect bottom.
His preferred response is to add risk on weakness, especially in quality cyclicals that have derated while earnings revisions remain strong. He highlights industrials as a relative bright spot, citing durable revisions, improving ISM backlog data, and freight volumes turning positive for the first time in nearly four years. In his view, these signals do not point to a cycle rolling over.
Wilson also says the election removed some uncertainty around AI spending. He estimates data center spending in 2027 is about 5% of consensus S&P 500 revenue, with a slightly higher but still mid-single-digit contribution in 2028, and he thinks the earnings impact should be manageable. He remains highly constructive on AI adoption, selective on capital-spending beneficiaries, and expects the post-midterm setup to improve even if the Fed delays the bottom into December.
Key takeaways
- Wilson thinks the correction is closer to the end than the beginning, with the S&P 500 approaching his 7100 to 7,300 support range.
- He expects quality cyclicals, especially industrials, to offer a better entry point than defensive quality names because expectations have fallen faster than fundamentals.
- Wilson says semiconductors are down roughly 40% from June highs and may still retest last week’s lows before a durable bottom forms.
- He sees AI adoption as one of his highest-conviction themes into 2027, while staying selective on semiconductors and other capex beneficiaries.
- He believes the election reduced uncertainty around AI buildout and that market fear has already done most of the damage.
Notable quotes
“I think that's where we're at now. The midterms were the rumor and the market spent several months selling it”
“The good news is that this correction looks much closer to the end than the beginning”
“My preference is to use weakness over the next few weeks to begin adding risk, particularly in quality cyclicals”
“Those are not signals of a cycle rolling over. They suggest parts of the economy that are still moving forward”
“This is not the moment to get bearish. Bottom line, buy the rumor and sell the news, but in reverse”
How the episode opens
Welcome to Thoughts on the Market. I'm Mike Wilson, Morgan Stanley CIO and chief US equity strategist. Today on the podcast, I'll be discussing where we are in the bottoming process for this equity market correction.
It's Monday, November 9th, at 11:30 a.m. in New York. So, let's get after it.
There are times when the market spends months worrying about an event only to discover that by the time it arrives, most of the damage has already been done. I think that's where we're at now. The midterms were the rumor and the market spent several months selling it.
Semiconductors, data center beneficiaries, and many early cycle winners were hit hard before election day while the S&P 500 finally began catching down to the weak breath underneath. That was the missing piece of the correction we identified back in June. the transition from early to midcycle, the peak in the rate of change of earnings revisions, and a Fed that became less accommodative just as investors were most crowded into the momentum of early cycle beneficiaries.
The good news is that this correction looks much closer to the end than the beginning. The S&P 500 has moved toward our 7100 to 7,300 support range we identified back in August. While semiconductors are down roughly 40% from their June highs and are approaching the downside targets suggested by our silver stock analog.
I would not be surprised to see one more test of last week's lows, perhaps even a break on lower momentum. That would be the cleanest technical outcome. However, I would not wait for a perfect low since markets rarely send engraved invitations.
My preference is to use weakness over the next few weeks to begin adding risk, particularly in quality cyclicals that have derated substantially but continue to show strong earnings revisions.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- market bottoming
- sp-500 support
- earnings revisions
- semiconductors selloff
- fed policy expectations
Companies and tickers mentioned
- MS
- Morgan Stanley
Watch the episode
Watch “A Stock Market Bottom in Sight” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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