NextFin News - The S&P 500’s recent slide, triggered by the escalation of the U.S.-Israel conflict with Iran, is nearing its conclusion according to Morgan Stanley’s chief investment officer, Mike Wilson. In a research note released on Monday, March 30, 2026, Wilson argued that the equity market correction is entering its "final stage," suggesting that the worst of the geopolitical-driven selling may have already passed through the system. The benchmark index fell 0.9% earlier this month, dragging it into negative territory for the year as investors grappled with surging energy prices and a spike in the 10-year Treasury yield to 4.25%.
Wilson, who has maintained a reputation as one of Wall Street’s most prominent bears over the past several years, has frequently cautioned against high valuations and the risks of a "hard landing." His current assessment that the correction is bottoming out represents a tactical shift, though it remains a minority view among major sell-side institutions. While Wilson sees an end in sight, his peers at Goldman Sachs and Bank of America have maintained more cautious stances, warning that a prolonged conflict in the Middle East could still derail the broader bull market if oil supply remains constrained.
The market’s volatility has been exacerbated by conflicting signals from Washington. U.S. President Trump recently noted that the impact on oil prices has been less severe than initially feared, citing "substantial talks" with Tehran that led to the passage of ten oil tankers through the Strait of Hormuz. However, consumer sentiment continues to suffer as gasoline prices at the pump reflect the broader uncertainty. Wilson’s thesis rests on the idea that the "equity risk premium" has already adjusted to these geopolitical shocks, and that corporate earnings—the traditional lifeblood of the market—will prove more resilient than the headlines suggest.
This optimistic outlook is not without significant risks. The primary threat to Wilson’s "final stage" theory is the potential for a second-round inflation spike driven by energy costs, which would force the Federal Reserve to maintain higher interest rates for longer. Historically, geopolitical crises tend to be resolved from a market perspective within six months, but the current entanglement involves direct military friction that complicates traditional recovery timelines. If the diplomatic "presents" described by U.S. President Trump fail to materialize into a lasting de-escalation, the S&P 500 could face a deeper drawdown before a true floor is established.
Furthermore, the divergence in analyst opinions underscores the lack of a clear consensus. While some strategists at Glenmede and Carson Group argue that such disruptions typically do not have a sustained impact on long-term growth trajectories, the reality of 2026 has seen the "AI hype machine" lose some of its ability to mask macroeconomic pain. Wilson’s call for an end to the correction assumes that the market has already priced in the "known unknowns" of the Iran war, a gamble that depends entirely on the stability of the current, fragile diplomatic channel.
Explore more exclusive insights at nextfin.ai.
