Morgan Stanley's Mike Wilson: The Recession Has Already Bottomed Out

Morgan Stanley's Mike Wilson believes that a recession began in 2022 and has since bottomed out, transitioning into a recovery phase. He argues that many missed the recession due to its nature as a rolling downturn. Wilson points out that the turning point occurred in the fourth quarter of 2022.

Title: Morgan Stanley's Mike Wilson Predicts Economic Recovery After Rolling Recession

Morgan Stanley's Mike Wilson, the Chief U.S. Equity Strategist, has recently shared his views on the economic landscape, suggesting that the U.S. economy has transitioned from a recession into a recovery phase. Wilson believes that a recession began in 2022 and has since bottomed out, leading to a period of recovery. He argues that many missed the recession due to its nature as a rolling downturn, with the turning point occurring in the fourth quarter of 2022 [1].

Wilson's analysis hinges on the slowing pace of job growth in the United States, which he believes signals that the economy is nearing a bottom rather than indicating the onset of a recession. This optimistic outlook is based on the expectation that the U.S. economy has the capacity for recovery [1]. The team led by Wilson suggests that unemployment will not rise rapidly and that large negative non-farm payroll numbers are unlikely unless the economy experiences another shock.

The recent jobs data, which showed an increase of just 22,000 jobs in August, fell short of market expectations. Additionally, revisions to June's data downward and July's upward have "sealed the deal" for a Federal Reserve interest rate cut in September. Wilson and his team believe that June was the low point in the current non-farm payroll cycle, but other indicators suggest that job weakness was most pronounced around "Liberation Day," which they consider the trough of the rolling recession [1].

The recovery is being led by the technology and consumer discretionary sectors, which benefited significantly from COVID-19 related stimulus packages. Other sectors are experiencing their own recessions at different times. This is why traditional recession definition indicators have not shown a typical surge, despite the revisions in earnings data providing evidence of recovery [1].

Wilson also notes that investors should not be overly concerned by the latest jobs data, as it is a lagging indicator. By the time the data confirms a downturn, the stock market has often already sensed it. However, there is a short-term risk that the Federal Reserve may not provide sufficient response measures to support the recovery, potentially leading to volatility in the stock market during the seasonally weak period between September and October [1].

Morgan Stanley advises investors seeking defensive hedging to focus on large-cap healthcare stocks, as earnings revisions in the pharmaceuticals/biotech, medical devices, and services sectors are steadily increasing. The bank also upgraded small-cap stocks from "underweight" to "neutral," acknowledging the potential for further interest rate cuts to drive funds into these stocks [1].

Wilson's views align with Morgan Stanley's broader outlook for the economy and markets, which suggests that the U.S. is transitioning from a rolling recession to a rolling recovery. The bank believes that a new bull market for equities began with the trough in the rolling recession that started in 2022 and that dips in the market should be viewed as buying opportunities [2].

References
[1] https://www.markets.com/analysis/morgan-stanley-jobs-data-recession-outlook-952-en
[2] https://www.morganstanley.com/insights/podcasts/thoughts-on-the-market/new-bull-market-sep-2025-mike-wilson