Business · Markets · 2 hrs ago
Morgan Stanley sees possible 9% US stock pullback before recovery
Morgan Stanley strategist Mike Wilson warns US stocks could fall about 9% before recovering.
He points to concerns over heavy AI spending, tighter financial conditions and uncertainty around the US midterm elections.
Major technology companies are raising large sums to build data centres and related infrastructure, prompting questions about whether markets can finance all the planned investment.
Wilson says this differs from the dot-com bubble because companies are putting the money into real business expansion.
But he warns that semiconductor stocks could fall another 10% to 15% by mid-November, and smaller or financially weaker firms may struggle with high borrowing costs.
He sees a possible drop in the S&P 500 to around 7,100, followed by a rebound toward 8,000.
Wilson expects a stronger market after the election risks pass, though past post-election gains do not guarantee future returns.
Morgan Stanley sees the S&P 500 potentially falling about 9% before recovering to 8,000.
The bank’s US equity chief strategist, Mike Wilson, cited AI investment costs, uncertainty around the US midterm elections and tighter financial conditions as risks.
Wilson said semiconductor stocks could fall a further 10% to 15% by mid-November.
He said a pullback could create a buying opportunity, and expected the market to rise again after the election.
Wilson argued that AI companies’ fundraising differs from the dot-com era because the money is being used for business investment.
- Who
- Morgan Stanley and its US equity chief strategist, Mike Wilson.
- What
- Wilson said US stocks could fall about 9% before recovering, and that the pullback could be a buying opportunity.
- When
- The report was published on November 2, 2026; Wilson discussed the outlook in an interview reported on November 1.
- Where
- The United States.
- Why
- AI investment funding needs, midterm election uncertainty and tighter financial conditions could weigh on stocks.
This story does not have two clearly opposing sides.
Wilson’s Morgan Stanley analysis cited financial conditions and questions about AI investment funding as risks.
Bloomberg reported Wilson’s interview on the outlook for US stocks.
Donga Ilbo published its report on Morgan Stanley’s forecast.
Wilson said semiconductor stocks could fall a further 10% to 15%.
- Possible S&P 500 low
- About 7,100, roughly 9% below its recent high
- Possible recovery level
- 8,000
- Semiconductor forecast
- A further 10% to 15% decline by mid-November
- Russell 3000 stocks
- About 60% had fallen more than 20% since June
- Nominal US GDP growth
- About 7.5%
- 10-year Treasury yield
- Wilson said 5% would look manageable alongside 7% to 8% nominal GDP growth
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What people are saying
Investors are questioning the ultimate returns from AI investment, the cost of capital, and whether credit markets can absorb all the planned spending.
Companies are not issuing shares simply for financial engineering. They are issuing them to spend money, and there is a growth element to that.
The market is funding these companies now. Of course, the situation could change.
We may have to go down first and then rise, but I am confident that at least six months will be a pretty good period.