Morgan Stanley Bear Mike Wilson Sees Stock Rally Broadening

One of Wall Street’s most prominent bears is now expecting gains in the US equity market to broaden into less loved corners than the big tech companies that have dominated the rally so far.

Morgan Stanley’s Mike Wilson, who stuck with his prediction of a stock market decline last year while the S&P 500 Index surged 24%, sees opportunities in names outside the so-called Magnificent 7 companies that have powered equity gains through much of 2023. He’s urging investors to buy high-quality, growth names that can generate pricing power.

“In the stock world, I think once again, it’s going to be idiosyncratic — I don’t think it’s going to be as narrow as last year,” Wilson said Tuesday afternoon at the iConnections Global Alts conference in Miami Beach. “The big index is full, it’s priced. For all intents and purposes, the value is not there. The value is underneath the market.”

Wilson’s comments come as momentum in Big Tech shows signs of fading after outsized gains last year. Nasdaq 100 futures are down almost 1% on Wednesday morning after Microsoft Corp. and Alphabet Inc. reported earnings showing artificial intelligence progress failing to meet investor expectations. Results from Meta Platforms Inc., Inc. and Apple Inc. are on deck this week. The companies, together with Nvidia Corp. and Tesla Inc., account for a record 29% of the S&P 500.

“I think it’s the Magnificent 4 now, and it is related to earnings,” Wilson said during a panel discussion at the conference. “Earnings for some of these companies are falling by the wayside. It’s getting harder even for some of those businesses because they can only do so much on the cost side price.”