'I'm hoping we get a pullback': Morgan Stanley's CIO says any potential tariff-fueled drop in stocks is a buying opportunity
Investors shouldn't be worried, though. Wilson thinks any upcoming corrections will be "short and shallow," presenting a great opportunity to buy the dip.
"I'm hoping we get a pullback to some degree," Wilson said on Bloomberg on Thursday. "A lot of clients are looking for a pullback of some kind."
Wilson has been pleasantly surprised at the resiliency of markets and their rapid recovery. In his opinion, April's Liberation Day chaos firmly marked the bottom for the stock market, and he anticipates a strong upward trajectory going forward for equities.
"This is what the beginning of a new bull market looks like," Wilson said. "It's just explosive — it doesn't let people in. The rate of change is accelerating beyond what you expected."
"The earnings revision breadth is explosive," Wilson added. "You can't deny the fact that companies are good are mitigating tariffs."
Earnings revision breadth, or the proportion of analysts who have raised their estimates minus the proportion who have lowered them, has improved significantly in the past few months. In April, earnings revision breadth was overwhelmingly negative at -25%. Today, the metric has fully turned a corner into positive territory, reaching 3%.
The earnings recovery has been especially pronounced in the financials sector, which Morgan Stanley is overweight on.
Morgan Stanley anticipates tariff impacts will become clearer in the third quarter as companies begin passing more of the cost on to consumers. Wilson's expecting a hit to corporate profits, especially for smaller companies with less pricing power, and increased inflation.
After a few months of relatively benign inflation reports, the June CPI number was slightly hotter than expected, indicating that tariffs are beginning to show up in economic data.
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