Morgan Stanley Says Pullback Could Come, But It's a 'Massive Opportunity'

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Mike Wilson, Chief US Equity Strategist at Morgan Stanley, said that while there may be a correction event that temporarily drives down the U.S. stock market, it will be a "massive opportunity" to jump into the market.

In an interview with Bloomberg on November 1 (local time), Wilson predicted that the S&P 500 could temporarily drop by about 9% from its previous peak to the 7,100 level due to factors such as the U.S. midterm elections, concerns over artificial intelligence (AI) spending, and liquidity constraints.

However, despite the war in Iran that has weighed on the stock market, he projected that after the short-term correction event concludes, a bull market will unfold with the S&P 500 index rising to the 8,000 level.

He emphasized that while midterm elections have always been an obstacle to the stock market, historical data shows a 100% probability of the market rising 6 to 12 months following midterm elections.

However, he analyzed that in this year's election, uncertainty is pressuring investors because President Donald Trump has hinted at doing "something big" after the election.

"Expectations that Democrats will take the House and win the Senate by a razor-thin margin are already largely priced into the market," he said. "However, if Democrats win by a wide margin, it could lead to tighter regulations or curb the expansion of data centers."

Addressing concerns that large-scale capital increases and initial public offerings (IPOs) by companies such as Meta Platforms, SpaceX, and Anthropic could trigger an oversupply of stock, Wilson diagnosed, "The U.S. real economy is absorbing massive amounts of funds like a sponge, as nominal gross domestic product (GDP) growth reaches 7.5%. There is growth potential in the fact that companies are issuing stock not for financial engineering, but to make actual expenditures on infrastructure and other areas."

When asked if he views this similarly to the reckless stock issuance during the dot-com bubble, he added, "The current market is fully capable of absorbing the financing of AI companies, and it is demanding higher risk spreads from weaker firms. Companies are balancing between issuing stocks and bonds, and even with high rates, large blue-chip companies have sufficient room for growth."

(Photo: Yonhap News)

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