Stocks Are in 2019-Like Rally: Morgan Stanley Strategist

“The 2019 analogy, in and of itself, suggests more index level upside from here, though we’d note that the Fed was already cutting rates for a good portion of 2019, and the market multiple is already close to 1 turn higher than where it peaked during that period,” Wilson said.

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Fed policymakers lifted borrowing costs again at their policy meeting last week for the 11th time since March 2022.

While Chair Jerome Powell pointed to encouraging signs that the Fed’s rate hikes are working to curb price pressures, he reiterated that policymakers have a long way to go to return inflation to their 2% goal.

While Wilson — who correctly predicted the selloff in stocks in 2022, though his bearish outlook is yet to materialize this year — said his team is open to the view that the economy could eventually enter a new upturn cycle.

Still, “we’d like to see a broader swath of business cycle indicators inflect higher, breadth improve and front-end rates come down before adjusting our stance in this regard,” he said.

–With assistance from Sagarika Jaisinghani.

Pictured: Mike Wilson. Credit: Bloomberg