Morgan Stanley’s Mike Wilson said in an interview with Bloomberg that traders should prepare for a stock market correction due to uncertainty surrounding the U.S. presidential election, corporate earnings and Federal Reserve policy.
“It’s very likely we’ll see a 10% correction between now and the election,” Wilson told Bloomberg Television, adding that the “third quarter is going to be volatile.”
Anticipation of two Fed rate cuts this year and talk of artificial intelligence have helped it rise 17% this year, following a 24% surge in 2023. Even Wilson, a longtime bear, has adjusted his stance since the past few years.
But Wilson told Bloomberg that “the chances of stocks going up between now and the end of the year are very low, much lower than normal,” putting the chances of stocks finishing the year higher at 20% to 25%.
Still, Wilson isn’t particularly worried about a drop in stock prices. Instead, he said, valuations are “uninspiring” after the S&P 500’s double-digit gains this year, which could create a buying opportunity for investors.
He believes the best way to trade the stock market right now is through individual stocks rather than indexes, and he and his team continue to recommend quality growth stocks, and quality stocks in general.
Mr. Wilson believes the momentum will continue, but the challenge will be finding cheap stocks in these categories. “If you get to a 10% yield, I’ll probably get interested again,” he said in an interview.
