Morgan Stanley's S&P 500 Analysis: Important Signs of Profitability

Morgan Stanley's Profitability Analysis for S&P 500

Morgan Stanley strategists indicate that data measuring the profitability of the S&P 500 shows that the seasonal weakness period has come to an end.

Current Situation and Decline Rate

The strategy team led by Michael Wilson reported that the S&P 500 profitability indicator suddenly dropped by 6% on October 21, and in the current situation, this decline rate has reached up to 11%.

Employment Data and Fed Policies

The strategy report noted that alternative employment data indicates a weakening labor market, which could lead the Federal Reserve (Fed) to adopt a more moderate monetary policy than previously expected.

Effects of the Shutdown and Expectations

The Morgan Stanley team emphasized that the federal government's shutdown has led to the absence of certain economic data, causing the Fed to potentially take slower steps in the stock market than anticipated.

However, signals that the shutdown will end suggest that tight liquidity and declining consumer spending are expected to be "temporary."

Future Targets

Wilson and his team stated that although the uncertainties arising from the government shutdown negatively impacted the recent price movements, they consider these to be "temporary" obstacles on the path to profitability growth leading to 2026.