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Thoughts on the Market

Thoughts on the Market

By: Morgan Stanley
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Short, thoughtful and regular takes on recent events in the markets from a variety of perspectives and voices within Morgan Stanley.

© Morgan Stanley & Co. LLC Economics Personal Finance
Episodes
  • Riding the Final Innings of the Market Correction

    Riding the Final Innings of the Market Correction
    Apr 6 2026
    Our CIO and Chief U.S. Equity Strategist Mike Wilson talks about risks in this late stage of the equity market pullback, how investors should position and what could come next.Read more insights from Morgan Stanley.----- Transcript -----Welcome to Thoughts on the Market. I'm Mike Wilson, Morgan Stanley’s CIO and Chief U.S. Equity Strategist. Today on the podcast I’ll be discussing what investors should be doing as we enter the final innings of this equity market correction.It's Monday, April 6th at 11:30 am in New York. So, let’s get after it.For the past several months, my view has been very consistent. In short, I continue to believe we’re in a bull market that began last April, coming out of what I’ve described as a rolling recession between 2022 and 2025. That recovery remains intact despite recent threats from AI disruption, private credit and a new war in Iran while the war between Russia and Ukraine persists.Markets have not been complacent with stocks correcting since last fall. In fact, it’s well advanced with the S&P 500’s forward price earnings multiple declining by 18 percent, a rare move outside of a recession or a Fed tightening cycle – neither of which is likely in my view.Meanwhile, earnings growth isn’t rolling over. Instead, it’s accelerating to multi-year highs and that’s a key difference versus past periods when oil shocks led to a recession. And, in the absence of that outcome, I see a market that’s discounted a lot of bad news.Beneath the surface, the damage has been even more significant with over half of stocks down at least 20 percent from their highs, and many down 30-40 percent. Resets of this scale usually occur near the end of corrections, not the beginning.The S&P 500 bounced last week off the 6300 to 6500 range of support that I have been highlighting. Could we re-test those levels? Sure – especially if rates push higher or geopolitical risks escalate further. However, I don’t see a meaningful breakdown.If anything, what’s still missing – and what I’d actually like to see – is a bit more de-risking in crowded trades like semiconductors and memory stocks, in particular. That kind of repositioning reset is often required to seal a durable bottom.So, if we are in the later innings, the next question is: where do you want to be? For me, it’s about balance and I think the right approach is a barbell of cyclicals, and quality growth.On the cyclical side, I like Financials, Consumer Discretionary, and Industrials. These are the areas where earnings momentum remains strong and valuations have come down meaningfully. It’s also what was leading prior to the start of the Iran conflict and reflects our core view that we are still in the early stages of a recovery from the rolling recession. Last week’s jobs report supports that view with private payrolls increasing by [$]186 000, one of the largest rises in three years. On the growth side, I’m focused on the hyperscalers as a very good risk reward at this point. These companies are trading at roughly the same multiple as defensive sectors like Staples, but with more than three times the earnings growth. Meanwhile the sentiment and positioning is as bad as it’s been since 2022’s bear market when these companies were showing negative earnings growth. So, what could go wrong? The main risk to equities is still rates and central bank policy, not the war.We know this because we just flipped back into a regime where stocks and yields are negatively correlated where higher rates put pressure on valuations. 4.5 percent on a 10-year Treasury bond continues to be a key threshold where stock valuations are likely to get worse before they rebound durably. Furthermore, bond volatility and Fed expectations are driving tighter financial conditions—and that’s been the real source of market stress lately.But here’s the irony: that tightening is also what ultimately sets up a more dovish pivot from the Fed and other central banks. If financial conditions tighten too much, the Fed has the flexibility to respond—and we have plenty of evidence that there’s willingness to do that over the past several years.Bottom line? The market has already done a lot of the hard work. It has priced in geopolitical risk, private credit concerns and even negative side effects from AI, which is ultimately a productivity enhancing technology.What we’re dealing with now is the final hurdle – policy, rates levels and volatility. And once we get through that, I think the path forward becomes a lot clearer.But remember, markets don’t wait for certainty – they move ahead of it. You should, too.Thanks for tuning in; I hope you found it informative and useful. Let us know what you think by leaving us a review. And if you find Thoughts on the Market worthwhile, tell a friend or colleague to try it out!
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    5 mins
  • How the Oil Shock Is Reshaping Markets

    How the Oil Shock Is Reshaping Markets
    Apr 2 2026

    Our Chief Cross-Asset Strategist Serena Tang discusses why the closure of the Strait of Hormuz and its impact on oil prices could define the entire market cycle.

    Read more insights from Morgan Stanley.


    ----- Transcript -----


    Welcome to Thoughts on the Market. I’m Serena Tang, Morgan Stanley’s Chief Cross-Asset Strategist. Today: how the latest energy shock is rippling across every major asset class.

    It’s Thursday, April 2nd, at 10am in New York.

    Right now, the markets aren’t just reacting to oil – they’re being shaped by it. The path of energy prices is quickly becoming the lens through which investors interpret everything else: growth, inflation, policy, and ultimately risk appetite. And depending on where oil settles, the market story could look very different from here.

    The starting point is simple: the baseline for energy prices has shifted higher. If tensions ease, our Chief Commodities Strategist, Martijn Rats, expects oil to settle around $80 to $90 per barrel in 2026, quite a step up from what we saw in 2025. If constraints persist, that rises to $100 to $110 per barrel. And in a more extreme scenario – where supply disruptions intensify – oil can reach $150 to $180 per barrel.

    Now, at those higher levels, the impact becomes nonlinear. Oil stops being just an inflation story and starts weighing directly on demand and growth. That’s why we see the current environment as binary: markets either revert to their pre-shock trajectory, or they begin pricing in a much tougher mix of tighter policy and weaker growth.

    To make sense of this, we frame the outlook through three scenarios.

    In a de-escalation scenario, supply disruptions ease quickly and oil stabilizes in that $80 to $90 per barrel range. Markets effectively breathe a sigh of relief. Investors refocus on growth drivers like earnings resilience and AI investment. And equities outperform, particularly cyclical sectors like consumer discretionary, financials, and industrials, while defensives lag. Bond yields fall, as inflation expectations decline. All in all, in plain terms, this is a classic risk-on environment.

    The second scenario – ongoing constraints – is a little bit more complicated. Oil stays elevated around $100 to $110 per barrel. Markets can absorb that, we think, but it creates friction. Equities still perform, but with more volatility and less conviction. The S&P [500] is likely to move within a wide 6400 and 6850 range in the near term. Leadership shifts toward higher-quality companies – those with steadier earnings and stronger balance sheets – along with select defensives like healthcare. At the same time, credit markets start to really feel the strain with spreads widening in general under performance.

    The third scenario – effective closure – is where the backdrop really changes. With oil above $150 per barrel, the focus shifts from inflation to growth risk. Investors will move into what we call a ‘recession playbook,’ dialing back equity exposure and increasing allocations to government bonds and cash. Defensive sectors like utilities, telecoms, and energy take the lead, as markets begin to price in a higher risk to the earnings cycle. Credit conditions tighten sharply, with high-yield spreads potentially widening materially.

    What makes this environment especially challenging is how everything connects. In a typical cycle, bonds help offset equity losses. But in an oil shock, that relationship can break down because inflation is rising at the same time growth is slowing. That’s what we usually call a stagflationary setup, and it makes diversification harder just when investors need it most.

    Currencies are reacting as well. In a more severe shock, the U.S. dollar strengthens, with EUR/USD potentially falling toward 1.13, while safe-haven currencies like the Swiss franc outperform. In a de-escalation scenario, EUR/USD could move back above 1.17 as risk sentiment improves.

    Importantly, markets have adjusted over the past month. Equity valuations at one point was down about 15 percent on a forward price-to-earnings basis, suggesting in a large part of the risk was being priced in. At the same time, sentiment has improved from deeply negative levels, especially over the last few days, even as volatility remains closely tied to oil.

    Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.
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    5 mins
  • Oil Markets Ahead: Pricing In More Risk

    Oil Markets Ahead: Pricing In More Risk
    Apr 1 2026
    As the Strait of Hormuz continues to be a chokepoint for oil, our Global Head of Fixed Income Research Andrew Sheets and our Head of Commodity Research Martijn Rats discuss possible outcomes for the interconnected market.Read more insights from Morgan Stanley.----- Transcript -----Andrew Sheets: Welcome to Thoughts on the Market. I'm Andrew Sheets, Global Head of Fixed Income Research at Morgan Stanley. Martijn Rats: I'm Martijn Rats, Head of Commodity Research at Morgan Stanley. Andrew Sheets: And today in the program: Oil flows through the Strait of Hormuz remain restricted. The implications for global energy markets and what may lie ahead.It's Wednesday, April 1st at 2pm in London. So, Martijn, it's great to sit down with you again. Three weeks ago, we were having this conversation; a conversation that was a little bit alarming about the scale of the disruption of the oil market with the closure of the Strait of Hormuz, and how that could have ripple effects through the global economy. Three weeks later, oil is still not flowing. What is happening? And what has maybe surprised you? Or been in line with expectations over the last couple of weeks? Martijn Rats: Yeah. Many things have been in line with expectations, in the sense that we're seeing the effects of the closure of the strait the earliest in regions that are physically the closest to the strait. So, we saw the first examples of physical shortages in, say, the west coast of India. Then we saw examples from the east coast of India From there on it's reverberated throughout Asia, where now governments have announced a whole host of. Effectively, energy demand, uh, management measures, uh, work from home, kids staying at home from school, um, cancellation of flights. There are quite many through, through Asia Also in Asia, we're seeing the type of prices that you would expect with this situation. Bunker fuel for shipping, somewhere between $150 to $200 a barrel. Jet fuel over $200 a barrel. Naphta going into Japan; naphta normally trades well below the headline price of Brent. Now $130 a barrel, that's more than double what it was in February. So, those things tell the story of this historic event. What has been surprising on the other end is how slow the reaction has been in many of the oil prices that we track the most. Like… Andrew Sheets: The numbers people will see on the news. You know, it's $100 a barrel maybe as we're talking. Martijn Rats: Yeah. It's strange to see jet fuel cargoes in Rotterdam more than $200 a barrel, but then the front month Brent future only trading at [$]100. That spread is historically wide and very surprising. But look, there are some reasons for it. The crude market had more buffers. There are a few other things. But how slow Brent futures have rallied? That has been somewhat surprising. Andrew Sheets: But you know, from those other prices you mentioned, those prices in Asia, those prices in Rotterdam that are maybe higher than the numbers that people might see on the news or on a financial website. Is it fair to say that in your mind that's sending a signal that this is a market that really is being affected by this? And being affected maybe in a larger way than the headline oil price might suggest? Martijn Rats: Oh, clearly. Look, the oil market is full with small price signals that tell the story of the underlying plumbing of the oil market. So, you can look at price differential. So, physically delivered cargoes versus financially traded futures. West African oil versus North Sea oil. Brazilian oil versus North Sea oil. Oil for immediate physical delivery versus the futures contract that trades a month out. And many of those spreads have rallied to all time highs. That is no exaggeration. And so, in an underlying sense, the stress in the market is clearly there. It is just that in front of Brent futures, which is the world's preferred speculative instrument to express a financial view on oil. Yeah, there the impact has been slower to come. But you're now seeing a lot of Asian refineries bidding for crudes that are further away in the Atlantic basin. So, demand is spreading to further away regions. And that should over time still put upward pressure on Brent. Andrew Sheets: In our first conversation, you know, you had this great walkthrough of both just putting the scale of this disruption in the Strait of Hormuz into the global context. How many barrels we're talking about, how that's a share of the global market. Maybe just might be helpful to revisit those numbers again. And also, some of the mitigation factors. You know, we talked about – well maybe we could release reserves, maybe some pipelines could be rerouted. Based on what you're currently seeing on the ground, what is this disruption looking like? Martijn Rats: Yeah, so to put things in context, global oil consumption is a bit more than 100 million barrels a day. That number lives in a lot of people's heads. But if ...
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    13 mins
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