Welcome to Thoughts on the Market.
I'm Mike Wilson, Morgan Stanley, CIO and Chief U.S. Equity Strategist.
Today on the podcast, I'll be discussing the recent equity market correction and what to look for next.
It's Monday, March 17th at 11.30 a.m. in New York.
So let's get after it.
Major U.S. equity indices are as oversold as they've been since 2022.
Sentiment and position engages are bearish and seasonals improve in the second half of March for earnings revisions and price.
Furthermore,
a recent dollar weakness should provide a tailwind of first quarter earnings season and second quarter guidance,
particularly relative to the fourth quarter results.
And the decline in rates should benefit economic surprises.
In short,
I stand by our view that $5,500 on the S&P 500 should provide support for a tradable rally led by lower quality,
higher beta stocks that have sold off the most, and it looks like it may have started on Friday.
The more important question is whether such a rally is likely to extend into something more durable and mark the end of the volatility we've seen year to date.
The short answer is probably not.
First, from a technical standpoint, there has been significant damage to the major indices,
more than what we witnessed in other recent 10% corrections like last summer.
More specifically, the S&P 500, NASDAQ 100,
Russell 1000 growth and value indices have all traded straight through their respective 200 day moving averages,