Midterm Elections a 'Clearing Event' for Stocks Regardless of Outcome, Says Morgan Stanley's Mike Wilson

Morgan Stanley's chief stock-market strategist, Mike Wilson, says the U.S. midterm elections are a classic "clearing event" for markets, and the outcome at this point doesn't really matter. In a recent note, Wilson argued that removing the uncertainty of the election will be a positive catalyst for equities, regardless of which party wins control of Congress. He noted that markets have historically rallied after midterms, as policy gridlock often limits new legislation that could disrupt business. Wilson's view comes as investors have been grappling with high inflation, aggressive Federal Reserve rate hikes, and fears of a recession. He believes the election will help shift focus back to fundamentals like earnings and economic data. While Wilson has been one of Wall Street's more bearish strategists this year, he sees the midterms as a potential turning point for risk appetite. The S&P 500 has fallen about 20% year-to-date but has recently shown signs of stabilization. Wilson suggests that if Republicans take at least one chamber, it could reduce the likelihood of tax increases or new spending, which markets would welcome. Even a Democratic sweep, he says, would likely be followed by a relief rally as uncertainty fades. The key takeaway: investors may soon get a clearer runway, and that could be good news for stocks.