Morgan Stanley’s chief investment officer says the current earnings season is revealing a market that is significantly stronger and broader than most investors appreciate.
In a new episode of the bank’s Thoughts on the Market podcast, Mike Wilson says the breadth of earnings strength is changing the market’s complexion in a meaningful way.
While hyperscalers and semiconductors are still playing a leading role, Wilson notes that the story has moved well beyond the usual names.
“When I look at this reporting season, what stands out isn’t just resilience, it’s strength that’s broader than most people appreciate. The typical company in the S&P 500 is growing earnings at about 16% and the median earnings surprise is running around 6%. That’s the strongest we’ve seen in four years.
What’s really interesting to me is that this strength is no longer confined to just the biggest tech names. Yeah, hyperscalers and semiconductors are still playing a leading role, but the story is expanding.”
Wilson names three sectors that have shown upward earnings revisions.
“We’re seeing earnings revisions move higher across financials, industrials, and consumer cyclicals in particular. That kind of breadth tells me this isn’t just a narrow leadership story, it’s something more
sustainable.”
On the geopolitical backdrop, Wilson says companies are feeling the pressure from the Iran conflict, pointing to rising freight costs, tighter supply chains and higher input prices across industries like chemicals and machinery. But he pushes back against the idea that these headwinds are hitting the market uniformly.
“Those impacts are uneven. They’re not hitting the entire market in the same way. In fact, at the index level, they’re being offset. Energy has become a positive contributor to earnings growth, and the higher-end consumer remains relatively strong…
We’re not dealing with a classic demand shock. We’re dealing with a redistribution of pressure, and companies are adapting. In many cases, they’re passing through higher costs.”
As of Monday’s close, the S&P 500 is trading at 7,200.
Photo by Jakub Żerdzicki on Unsplash
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