Can Stock Momentum Hold Up?

April 27, 2026

AI Summary

5 min read

Mike Wilson, Morgan Stanley's CIO and Chief U.S. Equity Strategist, explains in this episode why he stays bullish on U.S. equities despite a rapid market bounce and emerging cautions around inflation and Fed policy. Recorded on April 27, he argues the recent oversold-to-overbought shift in just 12 days mirrors patterns where markets move decisively, and current conditions support ongoing momentum through priced-in risks and strengthening fundamentals.

Market Bounce and Priced-In Risks

The U.S. equity market's dramatic recovery has prompted caution among investors, drawing parallels to last year's tariff concerns. Wilson notes that higher commodity prices, potentially amplified by the Iran conflict, will lag into company impacts. However, he contends equities have already absorbed sufficient damage: indices and subgroups priced these risks upfront rather than ignoring them. This contrasts with prior years' rolling recession, where growth was weaker.

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What you'll learn

1 (00:06) **Bullish Thesis Post-Rally** - Mike Wilson explains ongoing optimism despite recent stock surge
2 (00:19) **Dramatic Technical Bounce** - Market shifted from oversold to overbought in 12 days, prompting caution
3 (00:44) **Lagging Risk Impacts** - Compares commodity/inflation effects to last year's tariffs
4 (01:15) **Robust Earnings Growth** - Forward earnings up 25% vs 9% a year ago
5 (01:25) **Broad-Based Earnings** - Growth in median S&P 500 and small caps at double digits, unlike prior rolling recession
6 (01:56) **Q1 Earnings Strength** - 10% aggregate beat (2x average), with 2-3% higher forward guidance
7 (02:12) **CapEx Cycle Tailwinds** - Driven by earnings/cash flow, tax incentives, AI/reshoring; median growth near 10%

+ Full timestamped outline available in the app

Show Notes

Major U.S. stock indexes have rebounded sharply in recent weeks. Our CIO and Chief U.S. Equity Strategist Mike Wilson discusses the fundamentals that could support the continuation of the bull market.

Read more insights from Morgan Stanley.

----- Transcript -----

Welcome to Thoughts on the Market. I'm Mike Wilson, Morgan Stanley’s CIO and Chief U.S. Equity Strategist.

Today on the podcast, I'll be discussing why I remain bullish even after such a strong run in stocks.

It's Monday, April 27th at 11:30am in New York.

So, let’s get after it.

The U.S. equity market just experienced one of the most dramatic bounces in history from a technical standpoint. It went from oversold to overbought territory in just 12 days. Based on our conversations, the speed of this move has led some to express caution about the near-term path of equities – but that's the way it usually works. The market waits for no one once it decides to move on.

From our perspective, this feels like last year. Many investors are contemplating the lagging impacts of higher commodity prices on inflation just like they were thinking through the effects of higher tariff rates a year ago. Many companies will feel the downstream impacts on a lagging basis. But we believe equity indices and many subgroups already suffered enough damage to account for these concerns. In other words, the equity market isn't simply looking past the risks, it already priced them.

Take into consideration that the earnings picture is much stronger today with forward 12-month earnings growth approaching 25 percent versus just 9 percent a year ago. As well, we still hear many commentators suggesting that growth is only coming from a handful of stocks. While mathematically that is a fair point for the top-heavy S&P 500, it doesn't acknowledge that forward earnings growth for the median company and for small caps is also well into the double digits.

This cadence is very different from the prior three to four years when the economy was experiencing a rolling recession. It also supports our rolling recovery and broadening thesis we laid out a year ago. So far, the first quarter earnings season has delivered a 10 percent beat rate in aggregate. This is two times the long-term average. More importantly, second quarter and forward 12-month company guidance have increased by an additional 2 to 3 percent.

Besides earnings beat rates and guidance, we are also watching capex guidance and signs of pricing power. We entered 2026 with a view that the capex cycle was gaining momentum, thanks to three tailwinds: First, strong earnings and cash flow, which tend to correlate with capex. Second, tax incentives from the BBB; and third, strong demand for the AI buildout and reshoring of manufacturing.

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