--- title: "Morgan Stanley's Wilson: Sharp Semiconductor Decline Does Not Signal End of Bull Market; Correction Is a \"Necessary Cooling\"" type: "News" locale: "en" url: "https://longbridge.com/en/news/289050821.md" description: "Mike Wilson, Chief Strategist at Morgan Stanley, believes the recent sharp decline in tech stocks is merely a \"healthy reset\" within the bull market, not driven by deteriorating fundamentals. Although the semiconductor sector suffered a stampede due to crowded trades, the breadth of earnings revisions has hit a new cycle high, and economic data remains robust. Wilson maintains his year-end target of 8,000 for the S&P 500" datetime: "2026-06-08T11:54:48.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/289050821.md) - [en](https://longbridge.com/en/news/289050821.md) - [zh-HK](https://longbridge.com/zh-HK/news/289050821.md) --- # Morgan Stanley's Wilson: Sharp Semiconductor Decline Does Not Signal End of Bull Market; Correction Is a "Necessary Cooling" Mike Wilson, Chief Equity Strategist at Morgan Stanley, believes that **the recent sharp correction in tech stocks is merely a necessary "healthy reset" in the bull market, with the fundamental narrative remaining intact.** The Nasdaq Composite Index plummeted 4.2% last Friday, marking its largest single-day point drop in history, with shockwaves quickly spreading to global markets—South Korea's KOSPI Index, dominated by tech stocks, subsequently plunged 8.1% on Monday. In a research note released on Monday, Wilson pointed out that **the root cause of this sell-off lies in the overly crowded positions in semiconductor and memory chip stocks, rather than deteriorating fundamentals. Strong corporate earnings and robust economic data continue to support the stock market.** **Wilson maintains his year-end target of 8,000 for the S&P 500, stating that if the bull market is to continue until year-end, this correction is "inevitable and ultimately beneficial."** However, he also cautioned that investors need to closely monitor whether the 10-year U.S. Treasury yield breaks through 4.5%, as well as the potential risks of tightening market liquidity. ## Severe Overbought Conditions in Semiconductors Trigger Stampede from Crowded Positions Wilson provided a detailed review of this sell-off in his research note. He noted that the Philadelphia Semiconductor Index (SOX) plummeted 10% in a single day last Friday, its largest single-day drop since 2020, but emphasized that "the starting point is crucial." Data shows that the index had accumulated a year-to-date gain of as much as 96% before the middle of last week, deviating from its 50-day moving average by approximately 35%, the largest deviation in nearly 25 years. Its 9-day Relative Strength Index (RSI) reached 83, fully indicating that the rally was severely overextended. Due to the high overlap between the semiconductor sector and momentum trading, the long momentum factor also experienced its largest single-day drawdown since 2020 during the same period, falling by 8%. Wilson stated, "These dynamics do not necessarily mark the end of the bull market for related sectors, but these areas typically do not rebound immediately either." ## Fundamentals Remain Intact; Earnings Revisions Hit New Cycle Highs Despite the severe market volatility, Wilson emphasized that the fundamental logic supporting the stock market remains intact. On the macroeconomic front, the latest ISM Manufacturing Index rose to 54, the highest level since 2022. Non-farm payroll data showed that the average monthly job growth over the past three months was 166,000, the highest since 2023. Regarding corporate earnings, Wilson stated, "Our core view is that earnings remain strong and are more broad-based and sustainable than most people expect." He pointed out that the breadth of earnings revisions for the S&P 500 currently stands at 26%, hitting a new high for this cycle. ## Position Rebalancing: Focus on Consumer Discretionary, Banks, and Transportation Sectors Wilson believes this adjustment provides investors with an opportunity to reposition, suggesting shifting funds away from still-crowded momentum trades toward consumer discretionary, regional banks, and transportation sectors. Within the tech sector, he noted that the magnitude of earnings revisions for semiconductor and memory-related hardware stocks far exceeds other sub-sectors, but this advantage has already been fully priced in by the market. As for whether the software sector can regain its role as the leading force in both the tech sector and the broader market, Wilson remains cautious but stated that if software stocks can achieve a breakthrough in relative performance in the near term, "we may begin to adjust our view on the sector, as its earnings revisions have also improved recently." ## Liquidity and Interest Rates Are Key Variables Wilson also highlighted two major potential risks. The first is interest rate risk: if the 10-year U.S. Treasury yield significantly breaks through 4.5%, it could suppress stock valuation multiples. As of the latest data, the 10-year U.S. Treasury yield stood at 4.575%, having risen by approximately 12 basis points over the past five days. The second is liquidity risk. Wilson stated, "In our view, liquidity driven by the Federal Reserve and the Treasury Department has begun to tighten after rapid expansion in the first quarter. This dynamic has already been reflected in the weak performance of precious metals and cryptocurrencies over the past few months, and the further decline last Friday reaffirms this." ## Bull Market Framework Unchanged; Year-End Target of 8,000 Remains Firm Overall, Wilson's conclusion is that the market rally since the March lows cannot extend in a straight line indefinitely. The correction was expected and is beneficial for the sustained and healthy development of the bull market. "In our view, if this bull market is to continue until year-end, a correction is inevitable and ultimately beneficial," he wrote. "This remains our base case scenario, and we maintain our year-end target of 8,000 for the S&P 500." ### Related Stocks - [.SPX.US](https://longbridge.com/en/quote/.SPX.US.md) - [SPY.US](https://longbridge.com/en/quote/SPY.US.md) - [IVV.US](https://longbridge.com/en/quote/IVV.US.md) - [VOO.US](https://longbridge.com/en/quote/VOO.US.md) - [SPLG.US](https://longbridge.com/en/quote/SPLG.US.md) - [SPXL.US](https://longbridge.com/en/quote/SPXL.US.md) - [UPRO.US](https://longbridge.com/en/quote/UPRO.US.md) - [SSO.US](https://longbridge.com/en/quote/SSO.US.md) - [SH.US](https://longbridge.com/en/quote/SH.US.md) - [SPXS.US](https://longbridge.com/en/quote/SPXS.US.md) - [SPXU.US](https://longbridge.com/en/quote/SPXU.US.md) - [MS.US](https://longbridge.com/en/quote/MS.US.md) - [.IXIC.US](https://longbridge.com/en/quote/.IXIC.US.md) - [MS-O.US](https://longbridge.com/en/quote/MS-O.US.md) - [MS-Q.US](https://longbridge.com/en/quote/MS-Q.US.md) - [MS-E.US](https://longbridge.com/en/quote/MS-E.US.md) - [MS-I.US](https://longbridge.com/en/quote/MS-I.US.md) - [MS-L.US](https://longbridge.com/en/quote/MS-L.US.md) - [MS-P.US](https://longbridge.com/en/quote/MS-P.US.md) - [MS-A.US](https://longbridge.com/en/quote/MS-A.US.md) - [MS-F.US](https://longbridge.com/en/quote/MS-F.US.md) - [MS-K.US](https://longbridge.com/en/quote/MS-K.US.md) ## Related News & Research - [LIVE MARKETS-Wall Street's bull run appears intact, big brokers say](https://longbridge.com/en/news/289052197.md) - [EXPLAINER-Why SpaceX faces a longer wait to join S&P 500](https://longbridge.com/en/news/289043986.md) - [The Smartest Vanguard ETF to Buy With $500 Right Now](https://longbridge.com/en/news/289051649.md) - [Vanguard index product becomes first ETF to top $1 trillion in assets](https://longbridge.com/en/news/288633481.md) - [Citigroup lifts S&P 500 year-end target to 8,100 on earnings strength, AI 'supercycle'](https://longbridge.com/en/news/289030124.md)