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‘The Bear Market Is Still Alive,’ Wilson Says
Not everyone is on board with the idea that the bear market in US equities is "officially over."
"We respectfully disagree," Morgan Stanley's Mike Wilson wrote Monday, in a piece called (aptly) "The Bear Is Still Alive."
He conceded (or maybe just "noted" is better) that sentiment and positioning are now both bullish. He called that a "major reversal" from the beginning of the year, and suggested the rally might've begun to feed on itself courtesy of the psychology associated with the arbitrar
While Wilson has no doubt put together a trenchant analysis, this amateur guesser still thinks he’s missing the forest for the trees. Wage pressures are prevalent in service industries that make up a large part of overall employment, but the companies that make up the bulk of the S&P500 EPS aren’t as impacted by those wage pressures as the broader economy. Many of those same S&P500 companies are benefitting from the inflationary impulse in the pricing side of the equation, whether it’s in tech or commodities or energy or consumer goods. I admit that I don’t know how to pull the data to show this, but someone smarter than me (possibly a semi-pro guesser on this board?) could probably do so.
Along those same lines, even if big tech companies aren’t seeing direct benefits from generative AI right now, they are undoubtedly seeing the benefits of a much less competitive market for tech talent due to previous layoffs and companies holding off on new hires due to the potential of generative AI. These are very favorable EPS tailwinds and a big part of the reason why market bears are becoming the new team transitory.