On January 7, Financial Associated Press reported (Editor: Huang Junzhi) that Michael Wilson, one of Wall Street's prominent bears and Chief Investment Officer at Morgan Stanley, recently stated that the trend of US stocks this year will be divided into two halves, with the market experiencing tough months before investors sense policy changes.

He pointed out that rising bond yields and a stronger dollar will pose risks to the US stock market in the first half of this year, as the breadth of the stock market—the proportion of stocks participating in market gains—remains "not ideal."

In recent weeks, especially in the context of the Federal Reserve making strong statements, the yield on U.S. 10-Year Treasury Notes has risen to over 4.5%. Wilson stated in the latest report that, $S&P 500 Index (.SPX.US)$ with $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$the correlation has shifted to a "decisively negative correlation," which is a divergence that has not been seen since last summer.

Additionally, he also added that the dollar is currently approaching a level that may put pressure on companies with significant international exposure, and given the weak market breadth, this could further harm the stock market in the first half of this year.

"We believe that 2025 may be a year of 'ice and fire,' divided into the first half and the second half, with greater challenges in the first half," he wrote.

However, Wilson also noted that this situation could change in the context of declining interest rates, a weakening dollar, increased earnings revisions, clarity in the tariff policy of incoming President Donald Trump, and cabinet confirmations.

"After that, changes in Trump's policy—such as cuts to corporate taxes and measures to improve government efficiency—are likely to boost the stock market," he added.

Wilson's team anticipated last November that the S&P 500 Index would reach a Target Price of 6,500 points within the next 12 months, slightly below the Wall Street average Target Price of 6,539 points. This means that the Target Value of the Index will increase by approximately 9% compared to the closing price on Monday.

In fact, Wilson was once one of the most bearish Analysts on Wall Street and only became somewhat optimistic about Stocks around mid-2024. While he expects the S&P 500 Index to rise this year, he warns that the increase in US Stocks is not broad enough.

He explained that in terms of the 200-day moving average, the overall divergence between the benchmark Index and its components is at a historical high.

This divergence can narrow in two ways—either through improved market breadth or by the S&P 500 Index trading closer to its own 200-day moving average." He wrote.

Editor/rice