He dates the equity bear market to the summer of 2024, when cyclical and high beta stocks began to underperform defensives, and says “capitulation day” in April this year marked the turning point. Wilson describes a proprietary capitulation index of sentiment, positioning and volatility that reached levels seen only a handful of times in the past two decades. That episode, he says, “was the end of a bear market and the beginning of a new economic cycle”.
The US equity market has moved out of a three-year “rolling recession” and into the early stages of a new cycle that should favour laggards and small caps into 2026, says Mike Wilson, chief investment officer and chief US equity strategist at Morgan Stanley. Wilson argues that a capitulation in April marked both the end of the bear market that began in mid-2024 and the start of a broader earnings recovery.
He frames the past three years as a staggered downturn across different parts of the real economy, with weakness rotating through manufacturing, housing, smaller companies and this year, artificial intelligence capital expenditure, government spending tied to the Department of Government Efficiency (DOGE) and consumer services. “We’ve completed kind of that rolling recession, and now we’re having a rolling recovery,” Wilson says, pointing to a sharp V-shaped improvement in US earnings revisions that he notes “only happens when you’re coming out of a recession”.
