Morgan Stanley: Fed's Hawkish Shift Becomes Key Obstacle for Stock Market

LootboxPhobia · 2026-03-23T13:27:58+00:00

Morgan Stanley suggests that the market correction is nearing its end, but central bank tightening policies remain an obstacle to recovery. Analyst Wilson believes this is a normal adjustment in a bull market. Although future earnings growth is expected to accelerate, attention should be paid to the weakening of central banks' hawkish stance to achieve market recovery.

LootboxPhobia

2026-03-23 13:27:58

Abstract generation in progress

Investing.com - Morgan Stanley believes that the recent market correction is nearing its final stage, but in a report on Monday, the bank warned that the shift toward a more hawkish monetary policy has now become a major obstacle to market recovery.

Get more stock research and analysis on InvestingPro - Up to 50% off

Analyst Michael Wilson wrote that he still firmly believes “this is a correction within the bull market that began in April last year,” and added that this correction “has already been quite deep in terms of both time and price.”

Wilson pointed out that the forward P/E ratio of the S&P 500 has fallen 15% since October, and this valuation reset “is as significant as the situations we experienced during the manufacturing slowdown/global recession in 2015 and the recession fears in 2023.”

He noted that what is unusual this time is that “forward earnings growth continues to accelerate, approaching 20%,” which keeps the likelihood of the current oil shock ending the business cycle relatively low.

The analyst also highlighted signals of improvement beneath the surface, pointing to the sharp movements in the S&P/Gold ratio, which he called “one of the more constructive market developments recently.”

He wrote that historically, when the U.S. “becomes more involved in a major military conflict,” this indicator usually bottoms out.

Nevertheless, Wilson warned that “the Fed’s hawkish shift needs to weaken for the adjustment to end in nominal terms.”

He stated that Federal Reserve Chair Jerome Powell is considered more focused on inflation risks, and the re-emergence of a negative correlation between bond yields and stocks indicates that this dynamic “is back.”

He added that monitoring bond volatility and financing pressures will be key to identifying when policymakers shift toward a more supportive stance.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.

View Original

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.