We're in the 'final innings' of the market correction, says Morgan Stanley's Mike Wilson

The U.S. equity market is entering the final stages of a "nasty correction" driven by momentum unwinds and anxieties surrounding AI capital expenditure sustainability, geopolitical conflicts, and election cycles. Mike Wilson, Morgan Stanley’s Chief U.S. Equity Strategist, posits that while the market faces a volatile two-to-three-week window, a strong year-end finish is likely as the AI trade transitions from "enablers" like semiconductor firms to "adopters" who will leverage the technology for profitability in 2025. Current high interest rates reflect robust nominal GDP growth—running at approximately 7%—rather than economic weakness, suggesting the Fed may allow market forces like rising oil prices to act as a natural governor. Despite potential liquidity risks and a possible December rate hike, the outlook remains optimistic with an S&P 500 target of 8,500 achievable by mid-2025 as productivity gains from AI begin to manifest in corporate earnings.