The head of market research and strategy at Morgan Stanley Wealth Management says the US equity market has found its floor following a peak-to-trough correction of 9% over the past several months.
In a new CNBC interview, Dan Skelly pushes back against the prevailing bearish sentiment and notes that the day-to-day volatility obscures a stronger underlying story in the US economy.
According to Skelly, investors are looking past the Trump administration’s escalation rhetoric in the Middle East while focusing more on the productivity story happening in the US.
“I think the market is starting to get a sense that, at times, this White House escalates to de-escalate. And I think the market got more conviction around that recently. And I think, frankly, when you zoom out and think about what’s going on in the US, we’re going through a productivity boom right now…
At the end of the day, you’re going to go through these challenges day-to-day, week-to-week. But the underlying narrative in the US is one of innovation, one of technology, productivity and one of pretty strong earnings.”
Skelly also points to the VIX — the CBOE Volatility Index — as a key confirming signal that the market has carved a bottom.
“And one of the other markers for that is that the VIX has come off, the volatility index has come off substantially off of that 30 level. And usually the volatility has to peak before markets can bottom. And you layer on AI and all the things with productivity improvements just on top of everything else you were talking about. And I guess a bit of a tailwind from stimulus from the Big, Beautiful Bill.”
Looking at AI, Skelly cites research from Morgan Stanley’s economics team, which found that artificial intelligence will likely be a big positive for the job market.
“My colleagues in MS Economic Research, Michael Gapin and others, have looked at 200 years of innovation. And every time they look at new technology cycles, it’s beneficial to jobs. It is beneficial to productivity, and whereas a lot of people are thinking that a lot of jobs are going to go away, that doesn’t necessarily hold true.”
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