Morgan Stanley chief US equity strategist Mike Wilson says that stocks have entered the final stage of their almost nine-year bull market run.
In a wide-ranging discussion, Wilson outlined his views on the current market cycle, broke down his 2018 forecast, opined on the much-maligned short-volatility trade, and predicted how stock-pickers will fare in the coming months.
The stock market’s recent selloff was enough to throw any expert off-balance. While many pundits had been calling for some sort of reckoning for months, the sheer speed and severity of the downward move was more aggressive than many envisioned.
Mike Wilson, the chief US equity strategist at Morgan Stanley, aligns himself with that camp. Sure, he saw the overbought conditions and stretched valuations that contributed to the meltdown from a mile away, but he wasn’t expecting a 10% correction to transpire in just a week’s time.
Now that he’s had adequate time to digest the madness, Wilson has reoriented his view on the stock market going forward. In his mind, the selloff was a turning point for stocks, and marked the nine-year bull market’s entry into its final stage.
But that doesn’t mean he thinks all the money has been made in stocks. Wilson says there are still ample returns and opportunities to be seized — if investors know where to look.
In an interview with Business Insider, Wilson outlined his views on the current market cycle, broke down his mildly bullish 2018 forecast, opined on the much-maligned short-volatility trade, and predicted how stock-pickers will fare in the coming months.
This interview has been edited for clarity and length.
Joe Ciolli: What stage of the bull market would you say we’re in now, following the stock correction?
Mike Wilson: We’re very late-cycle in the economic expansion, and I measure that primarily through the labor market. We’re at full employment or just below it, and to me it’s pretty clear that there’s not much slack left in the economy — and that’s usually the final stage of a market cycle. You see inflation start to pick up. The Fed is going forward with raising rates even though the yield curve might be flattening. Their mandate has been met, so they keep pushing forward. It’s just a matter of timing.
Could this expansion extend into 2020? It could, but I don’t think it will. Keep in mind that there doesn’t have to be a full-blown recession to have a meaningful decline in earnings. A …read more
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