Morgan Stanley strategist warns against long-term stock market rally

On March 17, 2025, the stock market in the United States was attempting to achieve a second consecutive positive trading session. Wall Street was seeing some recovery, with the S&P 500 index trading approximately at the 5,650 mark. Despite the increase, Morgan Stanley strategist Michael Wilson expressed skepticism about the sustainability of this rebound. He indicated that the S&P 500 should ideally be at the 5,500 level for a tradable rally, but he strongly doubted that this would mark an end to the year-to-date volatility. Wilson pointed out that current technical indicators suggest that the gains seen recently could be difficult to maintain. Specifically, he highlighted that various indices, including the S&P 500 and Nasdaq-100, were trading below their 200-day moving averages, demonstrating that the current upward movement may face significant challenges. He suggested that any technical damage present will require time for recovery, even if it does not necessarily lead to further declines in index prices. Additionally, the initial signs on that Monday were not indicative of a robust recovery. The S&P 500 showed a modest rise of around 0.1% by midday, while the Nasdaq Composite had dipped about 0.4%. Despite the lackluster performance, RBC Capital Markets strategist Lori Calvasina mentioned it might still be a worthwhile entry point for investors, given risk-reward considerations. She had adjusted her "bear case" forecast for the S&P 500 down from 5,775 to a now-revised 5,500, suggesting that potential full-year losses could be limited if the index experiences a significant drop below recent lows. In essence, while some strategists, including Wilson, are cautious about the sustainability of the current market rebound, the fluctuations have still presented perceived opportunities for investors, particularly amidst the ongoing volatility. The mixed signals from Wall Street indicate a complex and uncertain financial landscape as the year progresses.