Morgan Stanley's Chief Strategist Issues Stock Market Warning
Posted by Hugh Cameron on Tuesday, March 11, 2025 Under: Technical Analysis
Morgan Stanley's chief strategist anticipates a challenging few months for U.S. stocks as President Donald Trump's tariff policies continue to fuel market volatility.
Mike Wilson, the chief investment officer and chief U.S. equity strategist at Morgan Stanley, predicted that the S&P 500 would drop to a low of about 5,500 within the first half of 2025—from its current level of about 5,700—before rallying to 6,500 by the end of the year.
"The path is likely to be volatile as the market continues to contemplate these growth risks, which could get worse before they get better," Wilson said in a note on Monday cited by Reuters and Bloomberg.
Why It Matters
Anxieties over the possible short- and long-term effects of the Trump administration's trade policies have unsettled the U.S. stock market, causing major indexes to decline and trail behind their European counterparts in the early weeks of his presidency.
While Wilson predicted that U.S. stocks would make a comeback, a sustained downward trend could contribute to greater economic uncertainty, while further diminishing the value of investments, retirement accounts and personal portfolios.
he Morgan Stanley logo is displayed on its Times Square building, in New York. Morgan Stanley reports earnings Wednesday, July 18, 2018. Mark Lennihan/AP Photo
he Morgan Stanley logo is displayed on its Times Square building, in New York. Morgan Stanley reports earnings Wednesday, July 18, 2018. Mark Lennihan/AP Photo
© Mark Lennihan/AP Photo
What To Know
The S&P 500 has already dropped about 3 percent since the start of the year and more than 5 percent since Trump's inauguration on January 20.
The Nasdaq composite, meanwhile, has fallen almost 8 percent and 11 percent in the same time frames. Though up 0.3 percent on the year to date, the Dow Jones Industrial Average is down more than 2 percent since Trump's inauguration.
According to Bloomberg, Wilson's year-end target (6,500) would necessitate a roughly 13 percent rally in the S&P from its current levels—a gain that, while significant, is not unprecedented and falls below the index's average annual increases in recent years.
The S&P 500 gained more than 23 percent in 2024, owing to major gains from tech stocks and strong performances by the Magnificent Seven—Amazon, Alphabet, Apple, Meta, Microsoft, Nvidia and Tesla.
However, the sector has faced several headwinds in recent weeks—notably the introduction of the DeepSeek chatbot, which casts doubt on the U.S.'s future dominance of the AI sector—and mounting concerns over the effects of Trump's trade agenda.
On Monday, Reuters reported, HSBC lowered its rating for U.S. equities, citing uncertainty over the effects of tariffs, while raising its outlook for European stocks.
What People Are Saying
Mike Wilson said in a recent episode of Morgan Stanley's Thoughts on the Market podcast: "Beyond rates and a stronger U.S. dollar, there are several other reasons why growth expectations are coming down. First, the immediate policy changes from the new administration, led by immigration enforcement and tariffs, are likely to weigh on growth while providing little relief on inflation in the short term. Second, the Department of Government Efficiency, or DOGE, is off to an aggressive start, and this is another headwind to growth initially."
HSBC Global Equity Strategist Alastair Pinder said: "It is important to stress that we are not turning negative on U.S. equities—but tactically, we see better opportunities elsewhere for now."
Wall Street analyst and strategist Tom Lee predicted a rebound for U.S. equities in Easter, telling CNBC last week: "I think it's very possible that March, April, May could actually be one of these huge rally months where we're rallying 10, 15 percent."
What Happens Next
Some economists have expressed concerns that the U.S. could be on the path toward an economic downturn.
During an interview with Fox News on Sunday, Trump declined to rule out the possibility of a recession in 2025, telling anchor Maria Bartiromo, "I hate to predict things like that."
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