In a note released Monday, Wilson — the chief U.S. equity strategist at Morgan Stanley — argued that the dramatic volatility that has roiled markets recently is not the start of a selloff. It’s closer to the end. “This correction is ripe in terms of timing and price,” he wrote, anchoring the call with a striking data point: 50% of all stocks in the Russell 3000 are now down at least 20% from their 52-week highs, and among members of the S&P 500, that figure exceeds 40%.​

The backdrop is important. Wilson spent years arguing, often in isolation, that the economy was much weaker for many businesses and consumers than key economic statistics (nominal GDP or employment) suggested. Rather than a single crash, he says, the weakness moved sector by sector — first technology, then consumer goods, then the economy as a whole — meaning that the usual markers of recession, rising unemployment and falling GDP, remained muted while the pain intensified underneath. He called it a “continuing recession.” Most people on Wall Street thought he was wrong.​

He wasn’t. Wilson identified April 2025 – when the White House’s announcement of tariffs on Liberation Day triggered a market capitulation – as the trough of the recession. From that point on, earnings revisions saw a dramatic V-shaped rebound, payroll revisions improved, and layoff data peaked and rolled over. The start-of-cycle recovery he had planned was underway. And above all, it is this context of recovery and reacceleration that shapes Wilson’s view of the current turbulence.​

According to him, this week’s sell-off constitutes a “correction within a bull market” and not a new slowdown. It began last fall, when liquidity tightened, well before crude oil prices soared and the VIX appreciated in recent weeks following the escalation of the conflict in Iran. The geopolitical clash served as a “final blow” – the kind of capitulating event that usually marks an end rather than a beginning.​

The figures confirm this regarding the damage already caused. Software and services stocks were hit the hardest, with 97% of S&P 500 members in that sector trading at least 10% below their 52-week high. Semiconductor, consumer discretionary and financials stocks tell a similar story. The S&P 500’s roughly 15% decline from the peak is real, but it significantly underestimates the extent of the carnage that has rippled beneath the surface.​

What if the war continued?

What sets today apart from the recession’s darkest chapters, Wilson says, is that the fundamental engine is running. S&P 500 earnings are up +13% and accelerating – in stark contrast to the deteriorating earnings environment that has accompanied previous oil shock recessions. The price of crude oil has risen about 40% year-over-year, well below the spikes of more than 100% that have historically derailed economic cycles. Fiscal support is substantial, with personal income tax refunds up 17% year over year, and the Fed has become expansionary again after shrinking its balance sheet for much of last year.​

The problem, of course, is that Wilson’s analysis assumes that the Iranian conflict remains contained, that oil remains below $100 a barrel, and that the geopolitical situation will resolve itself in “weeks, not months.” These are huge assumptions given the intractable nature of the war in Iran, which by all appearances will last longer than the three weeks publicly estimated by President Trump. History suggests that geopolitical shocks have a nasty habit of defying established resolution deadlines.

Wilson himself acknowledges that the disruption of the Strait of Hormuz blocks about 20 million barrels per day of tanker throughput, and that exploitation of strategic oil reserves will replace only a fraction of that volume. If crude rises above $100 for an extended period of time – which Wilson admits would completely change his view – the dynamic shifts from a “correction in a bull market” to something more serious. The bear case is not a remote extreme risk. It’s an escalation.

There is one area where Wilson’s critics should be careful: his track record of determining inflection points. He was right about the ongoing recession when the consensus scoffed. He was right to say that Liberation Day marked the trough of the wave. These calls were unlucky: They relied on a rigorous framework of leading indicators, earnings revision magnitudes, and liquidity monitoring that most strategists missed.