Big Tech, Mag 7 fueling market rally, not tariff hopes: Morgan Stanley
Morgan Stanley’s Chief Investment Officer, Mike Wilson, is predicting a significant rotation back into U.S. stocks, with a particular focus on a group of beaten-up stocks that he believes will lead the market rebound. In a recent interview on CNBC’s “Fast Money,” Wilson highlighted the potential for a rally in what he refers to as the “Mag Seven” stocks.
Wilson explained that the recent market rally began with a surge in low-quality stocks, driven by short squeezes. However, he noted that there has been a stabilization in the revision factors for the Mag Seven stocks, indicating a potential for further upside. Wilson believes that the index could reach as high as 5,900 in the near future.
The major indexes had a strong start to the week, with the S&P 500 gaining nearly 1.8% and closing at 5,767.57, just 6% below its all-time high. The Dow also saw a significant jump of almost 600 points, while the Nasdaq Composite surged over 2%.
The “Magnificent Seven” stocks, which include Apple, Nvidia, Meta Platforms, Amazon, Alphabet, Microsoft, and Tesla, played a key role in driving Monday’s rally. Tesla, in particular, saw its best daily performance since November.
Despite the positive momentum, Wilson cautions that there may only be a narrow window for gains. In a research note, he highlighted the support for a tradeable rally from around 5500, driven by stronger seasonals, lower rates, and oversold momentum indicators. However, he also warned that volatility is likely to persist throughout the year, and new lows could still be on the horizon.
Wilson emphasized that the market weakness is primarily attributed to fundamental and technical factors, rather than external issues like tariffs. He pointed to a slowdown in earnings revisions, the Fed’s decision to halt rate cuts, and other growth-negative factors as key drivers of the recent market downturn.
Looking ahead, Wilson maintains a year-end target for the S&P 500 of 6,500, implying a potential gain of nearly 13% from current levels. He also suggested that a new high could be possible in the second half of the year as investors look towards 2026.
In conclusion, Wilson’s insights provide valuable perspective on the current market conditions and offer guidance for investors navigating the uncertain landscape. As the market continues to evolve, staying informed and adaptable will be crucial for success in the ever-changing world of investing.
