The US stock market rebound started last Friday! Morgan Stanley's Wilson: But without Trump and the Federal Reserve, a reversal is unlikely

Morgan Stanley's Wilson stated that the market rebound has begun, but its sustainability is in doubt, with Trump and the Federal Reserve being crucial.Recently, Mike Wilson, Chief U.S. Equity Strategist at Morgan Stanley, wrote that the tradable rebound that started last Friday has been initiated, and the market adjustment may have come to an end. However, this rebound is more likely to be a tradable rebound rather than a sustained bull market.Wilson stated that unless the "Trump 2.0" agenda starts to provide growth momentum (tax cuts, deregulation, reducing market crowding out effects), or the Federal Reserve cuts interest rates again, the U.S. stock market is unlikely to reverse its trend.Clear Signs of Overselling, S&P Has Reached 5500 Support LevelWilson pointed out that there are clear signs of overselling, and the S&P has risen to the 5500 support level, indicating that the U.S. stock market has begun to rebound.The article shows that the current level of overselling in the market is the highest since 2022, sentiment indicators have improved, and seasonal factors are favorable for profit revisions and stock prices in the second half of March. A weaker dollar is also expected to support the earnings season and profit guidance.Wilson stated:“We maintain that the 5500 level of the S&P 500 index will provide support for a tradable rebound led by low-quality, high-risk stocks, as these stocks have previously seen the largest declines. The price action on Friday indicates that the rebound may have already begun, as the S&P 500 index traded at 5505 on Thursday.”The more important question is whether such a rebound marks the end of volatility since the beginning of the year. Wilson believes that this rebound is more likely to be a tradable rebound rather than a sustained bull market.Wilson pointed out that, from a technical perspective, major indices have been severely impacted, with losses exceeding those seen during a similar 10% adjustment last summer.Specifically, the S&P 500 index, Nasdaq 100 index, and Russell 1000 growth and value indices have all fallen below their respective 200-day moving averages, with many individual stocks experiencing declines close to 20%. The low-quality Russell 2000 index has fallen below its 200-week moving average for the first time since the 2022-2023 bear market.“Even if this technical damage does not lead to further price declines at the index level, recovery will take time.”Earnings Revisions Are Key Factors, Trump and the Federal Reserve Are "Indispensable"Wilson believes that the current rebound is unlikely to reach new highs before the reversal of various growth headwinds or further easing of monetary policy.This means that unless the "Trump 2.0" agenda starts to provide growth momentum (tax cuts, deregulation, reducing market crowding out effects), or the Federal Reserve cuts interest rates again, the U.S. stock market is unlikely to reverse its trend."In my view, merely relying on an oversold market cannot generate more upward momentum beyond a tradable rebound.""We firmly believe that earnings revisions are the most important variable. Although we may see seasonal strength or stabilization in revisions, we believe this factor will take several quarters to restore a positive upward trend."Wilson expects that policy changes to boost growth may come late in the second half of the year, but this is too far in the future for the market to anticipate; the Federal Reserve may only lower interest rates when the economic or credit environment worsens further, and it will take some time for this to stabilize the stock market.Risk Warning and DisclaimerThe market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk