A Morgan Stanley strategist mentioned that investors should Buy into the decline of the US stocks triggered by the credit rating downgrade last Friday, as the trade truce with China has reduced the likelihood of a US economic recession.
Morgan Stanley strategist Michael Wilson stated that investors should Buy any US stocks that fell due to the credit rating downgrade last Friday, because the trade truce with China has lowered the possibility of an economic recession.
The strategist believes that after Moody's rating downgrade pushed the 10-year US Treasury yield above the critical 4.5% level, the likelihood of a market pullback has increased. However, Wilson wrote in a report, "We will Buy on dips."
The S&P 500 Index Futures fell 1.2% on Monday, following Moody's downgrade of the US debt rating, which was intended to address the expanding budget deficit, with few signs of narrowing.
This has reignited concerns among investors about whether US Assets are still favored amid ongoing global trade uncertainties.
Moody's is the last major US rating agency to issue such a downgrade. Fitch Ratings and S&P Global Ratings stripped the US debt of its highest rating in 2023 and 2011 respectively.
So far this year, the performance of the US benchmark stock index has lagged behind its international peers, with the index only recovering its drop from 2025 after a temporary trade agreement between the US and China last week.
Wilson stated that the earnings reports season seems to have ended without being significantly affected by tariff uncertainties, which is an encouraging sign. He noted that recent profit upgrades also suggest that the stock market will rise further, even if trade data appears somewhat weak in the coming months.
Wilson stated, "While we respect this potential outcome, we believe that due to the trade agreement with China, the market's perception of this weakness as temporary has just increased."
In March, Wilson warned that volatility in the U.S. stock market would continue into the second half of this year. This strategist is now one of the few voices bullish on U.S. stocks rather than international stocks.
Meanwhile, Goldman Sachs strategist David Kostin stated that he expects the "seven giants" in Technology stocks to recover and outperform the S&P 500 Index under strong earnings trends. This year, as investors have sold off expensive U.S. stocks, the prices of these seven tech giants have significantly declined.
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