Morgan Stanley chief US equity strategist Mike Wilson says the equity correction that started in June is nearing its end. He expects one final sell-off before markets settle into a sustained recovery, with the S&P 500 dropping tactically to a range of 7,100 to 7,200 before climbing to a year-end target of 8,000.
Wilson points to three catalysts driving the next stretch. He expects worries about artificial intelligence spending to peak over the coming three to four weeks as markets absorb a wave of debt issuance, while the US midterm elections stand as a separate hurdle for sentiment. Liquidity, in his view, matters most of all.
Breadth of the pullback
The damage so far has been broad. Roughly 60 percent of Russell 3000 stocks have fallen more than 20 percent since the correction began, and the figure climbs to 96 percent among semiconductor names. Morgan Stanley strategists think chips could still fall a further 10 to 15 percent before finding support around mid-November.
The setback coincides with a shift in Federal Reserve policy. The central bank has resumed raising interest rates and has roughly halved the pace of its balance sheet growth, tightening financial conditions to a degree Wilson compares with 2018 and nearly as severe as 2022.
Signs pointing to recovery
Wilson describes current sentiment as neutral rather than extreme, and he expects early-cycle groups such as chips, financials, consumer cyclicals and autos to lead any rebound. He also cites a historical pattern in which the S&P 500 has gained an average of 17 percent in the 12 months following a midterm election.
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The S&P 500 closed at 7,698.14 points on 29 October 2026, down 0.59 percent from the prior close, according to MacroHerald’s own market data as of 30 October 2026, 01:04 GMT.
Source: Morgan Stanley | Data: S&P Dow Jones Indices
