Morgan Stanley's Wilson states that the stock market correction is nearing its end

Investing.com - Morgan Stanley strategist Michael Wilson says the latest stock market pullback appears to be nearing the late stages. He believes that “the threat of soaring oil prices to the business/profit cycle remains very high.”

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In a report on Monday, Wilson wrote that while a slight decline in the near term cannot be ruled out, “we continue to believe that, in terms of both time and price, this correction is closer to the end.”

The strategist pointed out that this decline has “entered a mature phase, with 50% of stocks in the Russell 3000 index falling at least 20% from their 52-week highs.”

He stated that the market is once again “far ahead of the now obvious risks” and added that this year’s pattern is similar to early warning signals seen last year.

However, he expects the current pullback to be “significantly milder than” last year, although volatility may persist due to geopolitical tensions.

The firm indicated that broad trading ranges are expected in the coming weeks. If the 200-day moving average is broken, the 6,400-6,500 zone will provide sustained support, with resistance around 6,850.

Wilson also mentioned that the firm is taking profits in small-cap stocks and has now adjusted this sector’s rating to neutral.

Despite recent uncertainties, Morgan Stanley maintains a constructive outlook for the next 6 to 12 months.

The firm emphasizes that S&P 500 earnings growth is accelerating to 13%, contrasting with the late-cycle oil price shocks that ended economic expansion, and notes that there is significant fiscal support and improving business cycle momentum.

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