Bloomberg Talks Morgan Stanley's Mike Wilson Talks Moody's Rating Cut
May 20, 2025
Mike Wilson, Chief U.S. Strategist at Morgan Stanley, dives into the implications of Moody's recent downgrade of U.S. debt. He argues that despite rising bond yields, investors should seize buying opportunities during market dips. Wilson sees a trade truce with China easing recession fears, giving stocks a more favorable outlook. He also highlights the resilience of key tech stocks and anticipates positive trends ahead, despite ongoing global uncertainties and budget concerns. Wilson's insights illuminate the shifting dynamics in the investment landscape.
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Buy the Dip After Downgrade
- Investors should buy the dip in US stocks after Moody's downgrade as there is strong demand from retail, systematic, and corporate buyers.
- The downgrade is unlikely to cause major stock selloffs but higher bond yields over 4.5% could trigger some pullbacks.
Foreign Investors Rebalancing US Assets
- Foreign investors have been reducing their US dollar assets mainly due to overexposure, not just the downgrade.
- Much of this rebalancing has happened through price changes, making current foreign ownership levels likely appropriate.
Magnificent Seven's Earnings Power
- The 'Magnificent Seven' stocks have performed well due to strong, consistent earnings and monopolistic business models.
- Their recent rally is driven by fundamentals, particularly improving earnings revision breadth, not just passive fund flows.