Bloomberg Talks Podcast – Episode Summary

Episode Title: Morgan Stanley Chief US Equity Strategist Mike Wilson Talks Fed Rate Cuts
Date: November 3, 2025
Host: Bloomberg (John, Lisa)
Guest: Mike Wilson (Chief US Equity Strategist, Morgan Stanley)

Episode Overview

This episode features Morgan Stanley’s Chief US Equity Strategist, Mike Wilson, in a conversation with Bloomberg's John and Lisa. The discussion revolves around the aftermath of a rolling recession, the Federal Reserve's approach to interest rates, the evolving US economic and market cycles, and the critical role of capital expenditure—especially in the context of AI, big tech, and broader market recovery in 2025-2026. The episode is rich with insights into the current economic climate, market cycles, the importance of Fed rate cuts, and the changing dynamics of large technology companies.

Key Discussion Points & Insights

1. The “Rolling Recession” and Recovery

• Summary:
  Mike Wilson posits that the US economy has been experiencing a “rolling recession” over the past three years, with various sectors taking turns in contraction while the government propped up growth. He pinpoints “April capitulation day” as the moment the government’s portion of the economy finally experienced recession-like conditions, marking the end of the rolling downturn.

• Notable Quote:

  “For all the companies that haven't been doing well for the last, I would say, three years, we've been sort of in a recession, I would argue—strong. We've done the work on this… most the private economy kind of suffering, government kind of carrying the water. And then we basically saw all of that come to fruition at the end in April. April capitulation day, as I call it…”
  —Mike Wilson [00:35]

• Current Phase:
  Wilson now sees the economy entering a “rolling recovery,” but emphasizes it's uneven across sectors:

  “It's not like everything flushed at once and everything recovers at once. So it is going to be staged…Semiconductors being an early cycle group. But we're not seeing the other… early cycle groups recover the way they typically do in a new economic cycle.”
  —Mike Wilson [01:50]

2. The Fed’s Interest Rate Policy – “Behind the Curve”

• Fed’s Position:
  Wilson is clear that the Federal Reserve remains “way behind the curve” on interest rates. He argues that rates are still too high to stimulate broad-based private sector growth.

  “The Fed is behind the curve on rates. They need rates much lower if you really want to get the private economy moving.”
  —Mike Wilson [01:50]

• Rate Cut Thresholds:
  He uses the two-year Treasury yield as a barometer:

  “My barometer is always the Fed is behind the curve if the Fed funds is above two-year treasury yields, and in order to stimulate the private economy I would say they need to be well below that. So that's 50 basis points just to get to neutral and maybe another hundred plus to get to something that's more stimulative…”
  —Mike Wilson [02:30]

3. What Triggers Broader Market Recovery?

• AI and Narrow Leadership:
  Wilson notes current market strength is narrow, led by AI and semiconductors. For a much broader rally—including small caps—meaningful Fed rate cuts must occur.

  “In order for that transition to work, the Fed has to cut though. That's what it's contingent on.”
  —Lisa [03:55]
  “If you go back and look at all these different economic cycles, small caps and… lower quality stocks typically don't outperform until the Fed gets below two-year treasury yields.”
  —Mike Wilson [04:00]

• Other Catalysts:
  While capital spending (capex) and deregulation help, the pivot only gets “solidified” by lower rates.

4. Big Tech in a New Investment Cycle

• Shift in Behavior:
  The discussion highlights a shift among major tech firms toward higher capital expenditures funded via increased debt, rather than the classic “asset-light, capital return-heavy” model.

  “We're used to companies that were investing tons. Ultimately they were giving it back to shareholders. Now we've seen… companies… spending tons and then come into the debt market to fund it. That's not what we're used to with these names.”
  —John [05:06]

• Market’s Role:
  Wilson points out that the market acts as a governing factor. Increased capex is being rewarded for now, but if cash flow decelerates, management will quickly respond by adjusting spending.

  “If all of a sudden the market starts to… become a governing factor on those stocks, I can guarantee you that the management teams are going to say, well maybe we aren't going to spend quite as much.”
  —Mike Wilson [05:29]

• The Debt Cycle:

  “In all of these build outs… we got to, we're now into the debt part. Okay, so now they just raised a ton of capital. Well, they're not going to sit, they're going to spend it. So that's another reason to be excited on one hand…”
  —Mike Wilson [06:29]

• Implications for Capital Return:

  “Capex now as a percentage of free cash flow is pretty high for these businesses. But once again, I want to go back. This is… by design, okay. The tax bill is basically incenting these companies to do it now… the administration is… really encouraging businesses of all types to start investing for the first time in 15 years.”
  —Mike Wilson [07:04]

5. Strategic Takeaway – The New Market Cycle and US Equities

• Cyclical Shifts:
  Wilson warns that investors can no longer expect decade-long expansions. Instead, the market is characterized by “hotter but shorter cycles."

  “We're not in these 10 year economic expansions anymore. And so it's two years on, one year off. Two years on, one year off. That's what we've had since COVID right? 2020, 2021 good. 22 bad, 23, 24 good. 24, 25, not so good. Now we're into a new two year cycle.”
  —Mike Wilson [07:53]

• Equities Outlook:

  “I think that the valuation is telling you that the growth is going to be better than we think. My view is that earnings growth [is] to be better next year than people expect. Now on the other side of that, I do think we're in a different environment…”
  —Mike Wilson [07:53]

Notable Quotes & Timestamps

• On Rolling Recession:

  “April capitulation day, as I call it, was basically the government recession that was the final piece of the rolling recession… The markets figured all this out.”
  —Mike Wilson [00:35]

• On Fed Rate Cuts Required:

  “They need rates much lower if you really want to get the private economy moving.”
  —Mike Wilson [01:50]

• On Current Market Breadth:

  “AI Capex is still… one of early recoveries here, semiconductors being an early cycle group. But we're not seeing the other quote unquote early cycle groups recover the way they typically do in a new economic cycle. Why? Because the Fed is behind the curve.”
  —Mike Wilson [01:50]

• On Small Caps and Fed Policy:

  “Small caps and… lower quality stocks typically don't outperform until the Fed gets below two-year treasury yields.”
  —Mike Wilson [04:00]

• On Big Tech Spending:

  “The asset light story is being called into question. We haven't seen it yet, although last week was the first sign. We saw pretty divergent performance between Some of these. And that's, that's a risk…”
  —Mike Wilson [05:29]

• On Investment Cycles:

  “We're not in these 10 year economic expansions anymore… now you have a higher velocity economy, that means you're going to have to trade it a little bit more. But right now I think it's, you know, we're in pretty good position.”
  —Mike Wilson [07:53]

Key Segments & Timestamps

• Introduction & Rolling Recession Discussion: [00:22]–[01:50]
• Fed Policy & Rate Cut Requirements: [01:50]–[03:55]
• Broader Market Breadth & Trigger for Small Cap Outperformance: [03:55]–[04:30]
• Outlook on the Fed in 2026: [04:30]–[05:05]
• Big Tech’s Shift in Capex and Capital Structure: [05:05]–[07:41]
• Summary on US Equity Outlook & Market Cycle Dynamics: [07:41]–[08:31]

Episode Tone

The tone is analytical and pragmatic, with Wilson exuding cautious optimism layered over a clear-eyed awareness of both economic and market risks. He remains confident in Morgan Stanley’s outlook, but stresses the need for investors to adapt to the rapid and irregular cycles of the new era.

TL;DR

Mike Wilson argues that the US is coming out of a multi-year rolling recession, but that the recovery is uneven and contingent on significant Fed rate cuts. The ongoing investment boom, especially from big tech, is reshaping market dynamics, but creates new risks and uncertainties. Investors should prepare for shorter, hotter market cycles—and watch closely for policy pivots from the Fed as the signal for broader market participation.