Why Stocks Get Ahead of the Fed

Mike Wilson, Morgan Stanley's CIO and Chief U.S. Equity Strategist, discusses the counterintuitive relationship between economic data and stock market performance. He argues that the recent stock market rally, beginning in April, is driven by forward-looking factors like improving earnings revisions, despite lagging economic indicators like weak labor data. Wilson posits that weak labor data is actually a positive catalyst for stocks, as it could prompt the Federal Reserve to cut interest rates more aggressively. He emphasizes that equity markets are forward-looking, while economic data is backward-looking, and April's market low already discounted the currently weak economic data. He concludes that this marks the beginning of a new bull market, despite the lagging indicators.