Morgan Stanley's Mike Wilson: US stock correction in late stages, S&P 500 target 7,100–7,300

Michael Wilson, chief US equity strategist and CIO at Morgan Stanley, told CNBC that the US stock market correction has entered its late stages. In his view, lower oil prices could be the next catalyst for equities through 2027.

Key points

• Index target: Wilson's target range for the S&P 500 is 7,100 to 7,300, and he believes the index is now close to it.
• Sign of an end: A sharp drop in market breadth across sectors suggests the correction is nearing its end. Still, he cautioned investors against trying to pick the exact bottom.
• A correction beneath the surface: Wilson called it "a very damaging correction underneath the surface." Weakness that had long existed across parts of the market is finally showing up in the headline index.
• Historical pattern: Stock returns in the 6 to 12 months after US midterm elections have historically been very strong.

Oil: from inflation risk to market support

Brent crude has fallen about 16% in recent trading and WTI about 12%. Wilson attributes part of the drop to easing fears of military conflict and sees it as a potentially very positive factor for markets into 2027.

He expects oil to fall further, for two reasons:

1. Demand destruction after the price spike;
2. More supply from routes other than the Strait of Hormuz. Energy-vulnerable countries will look for alternatives to oil shipped through Hormuz, leading to more drilling and energy infrastructure, which he sees as another support for markets.

Wilson stressed that he personally expects oil prices to fall significantly, and that this view is not limited to lower military risk.

The core message: patience

For Wilson, a late-stage correction, lower energy costs and the positive post-midterm pattern together create a favorable setup for stocks into 2027. His view echoes Jack Stickley of Morgans this week, who also pointed to the S&P 500's positive performance after every midterm election since 1950.

For traders: Wilson sees 7,100–7,300 on US500 as a key support zone. Further declines in oil could also ease inflation pressure, although the Fed's tone remains hawkish for now.

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Source: Michael Wilson (Morgan Stanley) interview with CNBC