This Expert Says the S&P 500 Has 'Crashed Under the Surface.' What a Stealth Correction Means.

Core Insights - The S&P 500 is undergoing a "stealth correction," with significant disparities in stock performance indicating a deeper market issue, according to Morgan Stanley's Mike Wilson [1][1][1] Group 1: Market Performance - The spread between the top 50 and bottom 50 stocks in the S&P 500 is 68%, the largest in 20 years, suggesting a significant divergence in stock performance [1][1][1] - Individual stocks are experiencing greater volatility, while the S&P 500 index has shown relatively muted movements, indicating a disconnect between index performance and individual stock dynamics [1][1][1] Group 2: Future Outlook - Morgan Stanley's base case suggests the S&P 500 could rise by 13% from current levels, with a year-end target of 7,800 [1][1][1] - The correction at the stock level is estimated to be 70% to 80% complete, raising questions about whether the index needs to "catch down" to finalize the correction before a potential rally [1][1][1] Group 3: Investment Opportunities - Investors are encouraged to focus on battered stocks rather than the current winners, as opportunities may arise from those that have been negatively impacted [1][1][1] - The outlook for U.S. equities remains positive, especially if company earnings exceed high expectations, which could lead to increased market investment [1][1][1]