Relief and Volatility Ahead for U.S. Stocks

Mike Wilson, Morgan Stanley's CIO and Chief U.S. Equity Strategist, discusses recent equity market concerns and potential changes. He highlights positive developments in earnings season, including broadening growth and firming pricing power, with the median stock showing its best earnings growth in four years. Despite these improvements, the market traded heavy due to the Fed's less dovish stance and the ongoing government shutdown. Wilson suggests that labor market weakness, coupled with the administration's desire for a "hot" economy, will likely lead the Fed to adopt a more dovish policy than currently expected. He also addresses the impact of the government shutdown on liquidity and consumer spending, noting that its imminent end should alleviate market concerns. Finally, he touches on the muted market reaction to an upcoming Supreme Court decision on tariffs, attributing it to potential alternative authorities for the Trump administration and the lengthy timeline for any refunds. He concludes that while the end of weak earnings seasonality and the shutdown should bring relief, volatility will persist until the Fed fully commits to the administration's "running hot" strategy.