By Michael Wilson, Morgan Stanley chief US equity strategist
Is The Correction Over
Major US equity Indices are as oversold as they've been since 2022, sentiment/positioning gauges have lightened up considerably, and seasonals are set to improve in the second half of March for earnings revisions and price. Furthermore, recent dollar weakness should provide a tailwind to 1Q earnings season/2Q guidance relative to 4Q24, and, if historical patterns hold, the decline in rates should lead to upside in economic surprises. In short, we stand by our view that 5500 on the S&P 500 should provide support for a tradeable rally led by the lower-quality, higher-beta stocks that have sold off the most, and it looks as if it may have started on Friday after the S&P traded at 5505 on Thursday.
