Morgan Stanley: Geopolitical shock is the 'final blow'; sell-off near its end

ChainCatcher report: Morgan Stanley’s Chief U.S. Equity Strategist, Michael Wilson, released a report presenting a view contrary to current market panic, arguing that this sharp correction has already run its course in both time and space, and that the market is nearing a bottom rather than entering a new decline. Data shows that 50% of stocks in the Russell 3000 Index are down more than 20% from their 52-week highs, while over 40% of stocks in the S&P 500 have fallen by the same margin, indicating that half of all stocks are already in bear market territory—suggesting that the overall market decline underestimates the breadth of internal losses. Wilson views this sell-off as a “correction within a bull market,” which began last autumn with tightening liquidity, well before the recent escalation of geopolitical tensions. Market capitulation selling like this often signals an end rather than a beginning. Unlike previous recessions, which were accompanied by deteriorating earnings, S&P 500 earnings are currently growing at a 13% rate and accelerating further. Wilson’s thesis rests on two key assumptions: that the Iran conflict remains contained and that oil prices stay below $100 per barrel. If oil prices break above and sustain levels above $100, the market could shift from a correction into a more severe crisis.