Top analyst still thinks we’re on the cusp of a new boom for the economy, but investors aren’t with him: ‘Markets remain choppy’

Core Viewpoint - The U.S. economy is experiencing a "rolling recovery" despite current market volatility and investor skepticism, with potential for an economic boom in various sectors over the next six to twelve months [1][2]. Economic Outlook - Morgan Stanley's chief equity analyst, Mike Wilson, has shifted from a "rolling recession" perspective to a "rolling recovery" since April, indicating an early-stage economic boom [1]. - The economy has consistently surprised positively throughout 2025, despite warnings from skeptics regarding tariffs and macroeconomic uncertainties [2]. Earnings Performance - Third-quarter earnings have raised some concerns for Wilson, as investors are jittery and companies are not significantly raising guidance, reflecting a cautious outlook [2]. - The financial sector's earnings season has begun with total EPS surprises averaging almost 6%, which is above historical norms, yet the market's reaction has been muted [3]. Market Sentiment - Despite companies beating earnings expectations, investor confidence remains low, particularly in economically sensitive sectors like regional banks and capital goods [3]. - Wilson notes that unresolved risks are weighing heavily on traders' minds, contributing to a choppy market environment [2]. Future Catalysts - Potential catalysts for a powerful upswing in equities include de-escalation of trade tensions, stabilization of EPS revisions, and improved liquidity [2]. - Upcoming policy developments, such as anticipated trade negotiations at the APEC summit, are viewed as potential positive influences on the market [2]. Risks and Corrections - Wilson remains cautious about the possibility of a near-term correction in the stock market, citing recent credit market stress and scrutiny of regional banks following unexpected credit losses [2].