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5 min readMike Wilson, Morgan Stanley's CIO and Chief U.S. Equity Strategist, argues that earnings strength—not headlines, geopolitics, or Fed policy—is driving the ongoing equity rally. In this solo episode, he examines recent data showing robust, broadening corporate profits that are offsetting multiple risks.
Earnings Delivering Heavy Lifting
Wilson emphasizes that earnings remain the dominant force behind market performance. During the current reporting season, the typical S&P 500 company is growing earnings at about 16%, with the median earnings surprise at around 6%—the strongest levels in four years. This resilience stands out amid investor focus on external noise. Equities have stabilized despite headwinds because earnings are expanding above trend, enabling solid returns regardless of Fed actions. He notes that equity markets ultimately move on earnings and liquidity, and right now, earnings are more than compensating for liquidity concerns.
Broadening Beyond Big Tech
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What you'll learn
- 1 (00:00) **Podcast Introduction** - Mike Wilson, Morgan Stanley CIO and Chief U.S. Equity Strategist, tees up earnings as the key market driver
- 2 (00:18) **Earnings as Primary Market Driver** - Earnings outweigh headlines and Fed policy in pushing markets higher
- 3 (00:32) **Resilient Earnings Growth** - S&P 500 typical company growing earnings 16%, median surprise at 6%, strongest in four years
- 4 (01:04) **Broadening Earnings Revisions** - Upward revisions in financials, industrials, consumer cyclicals signal sustainability
- 5 (01:17) **Geopolitical Pressures Noted** - Iran conflict raises oil, inflation, supply chain risks felt in freight and input costs
- 6 (01:50) **Consumer Strength Persists** - Higher-end consumer holds up despite fuel costs, no demand shock yet
- 7 (02:08) **Corporate Adaptation** - Companies pass through costs, revenue surprises show improving pricing power
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Show Notes
Our CIO and Chief U.S. Equity Strategist Mike Wilson explains the factors behind stock gains across sectors.
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 earnings remain the most important variable for equity markets.
It's Monday, May 4th at 2pm in New York.
So, let’s get after it.
The more I think about what’s been driving this market, and the more time I spend with the data, the more I keep coming back to the same conclusion: it’s earnings. Not the headlines, not even the Fed. Earnings are doing the heavy lifting right now.
When I look at this reporting season, what stands out isn’t just resilience, it’s strength that’s broader than most people appreciate. The typical company in the S&P 500 is growing earnings at about 16 percent, and the median earnings surprise is running around 6 percent. That’s the strongest we’ve seen in four years.
What’s really interesting to me is that this strength is no longer confined to just the biggest tech names. Yes, hyper scalers and semiconductors are still playing a leading role, but the story is expanding. We’re seeing earnings revisions move higher across Financials, Industrials, and Consumer Cyclicals, in particular. That kind of breadth tells me this isn’t just a narrow leadership story; it’s something more sustainable.
At the same time, many investors are focused on the geopolitical backdrop, particularly the Iran conflict and what it means for oil, inflation, and supply chains. To be fair, companies are feeling some of that pressure. When you listen to earnings calls, you hear about rising freight costs, tighter supply chains, and higher input prices across industries like chemicals and machinery.
But here’s the nuance: those impacts are uneven. They’re not hitting the entire market in the same way. In fact, at the index level, they’re being offset. Energy has become a positive contributor to earnings growth, and the higher-end consumer remains relatively strong. Even with higher fuel costs, we’re not seeing a meaningful pullback in overall consumption – at least not yet.
That tells me that we’re not dealing with a classic demand shock. We’re dealing with a redistribution of pressure, and companies are adapting. In many cases, they’re passing through higher costs. Revenue surprises are running above historical norms, which suggests pricing power is improving.
Now, of course, earnings aren’t the only piece of the puzzle. Policy still matters, and the shift in rate expectations this year has been meaningful. The Fed has clearly become more concerned about inflation, and the market has repriced expectations to few
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