Morgan Stanley Market Strategist says downgrades raise buying opportunities

Any decline in stock markets related to Moody's downgrade of U.S. credit ratings may be a potential to create a purchase option for the company, Morgan Stanley's top stock market strategist said.

Mike Wilson, chief equity strategist at Morgan Stanley, said in a weekly study that temporary reductions in tariffs between the U.S. and China are projects that could lead to more durable gatherings. After Moody's downgrade, stock market declines will have a chance to buy dipping sauce.

Wilson said the correlation between stock returns to bonds is currently close to zero in the -1 to 1 range.

"Moody's downgrade of the U.S. credit rating last Friday is also worth considering, although Moody's was the last rating agency to lower the U.S. credit rating, a process that began 14 years ago in the summer of 2011," Wilson wrote.

Moody lowers U.S. credit rating, not debt rises

Morgan Stanley's chief market strategist said Moody's downgraded stock decline could bring buying opportunities.

“In short, a breakout of more than 4.50% in 10-year yields will lead to a modest escalation of valuations (the 5% compression is what we have obtained in previous historical analogs) – we will be buyers of this dip.”

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Wilson's note said Morgan Stanley economists were less optimistic about the lasting market rally for the other two items on the list, including conditions that allow the Fed to start lowering interest rates and lower yields on the 10-year Treasury notes.

Treasury Secretary Bessent rejects Moody's U.S. credit downgrade to "lagged indicator"

Finance Minister Scott Bessent testified at the house hearing in a red tie and dark suit — Treasury Secretary Scott Bessent dismissed downgrade as a lagging indicator of the economy.

The company's forecast predicts that the core personal consumption expenditure (PCE) index is a key inflation scale that is expected to rise in May and continue to increase in the summer. Core PCE was 2.6% in April, while the Standard PCE index was 2.3% last month — both figures above the Fed's 2% target rate.

"In short, it's unlikely that we'll see recent progress in the last two items on our checklist for a more sustained rally - the lack of Fed without recession data and a 10-year yield of less than 4.0%.

CBO says U.S. budget deficit expands, Treasury bonds rise to 156% of GDP

American flag flies over the U.S. Capitol — Moody lowered the U.S. credit rating rather than growing national debt.

Moody’s rating on Friday lowered the U.S. credit rating from its highest AAA to AA1, explaining that the move “reflects over a decade of growth in the government debt-to-interest payment ratio, at a level significantly higher than similar ratings.”

“The continuous U.S. government and Congress failed to reach consensus on a trend to reverse large annual fiscal deficits and growing interest costs,” the company said. “We believe that years of reduction in material for mandatory spending and deficits will be due to fiscal recommendations currently under consideration.”

Moody's added that it has seen the federal government's fiscal outlook worsen in the coming years, with spending on rights programs such as Medicare and Social Security rising in the coming years as the U.S. population ages and interest payments due to higher interest rates and increased debt.

Original article source: Morgan Stanley Market Strategist says downgrades raise buying opportunities