Morgan Stanley's Mike Wilson Talks FOMC Preview, Tech Trade - Bloomberg Talks

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[00:00]
A
Whatever your goal, trade show giveaways, client gifts or team gear, 4imprint has the promo products to match. With thousands of options from apparel and drinkware to tech and totes, it's easy to find the right fit for your brand and budget. With standout choices at every price point and with their 360 degree guarantee, you can be four imprint certain your order will show up just right, right on time. Explore more@4imprint.com 4imprint for certain
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Bloomberg Audio Studios Podcasts, Radio news this is Bloomberg Daybreak.
[00:36]
C
I'm Nathan Hager alongside Karen Moscow. Getting ready for a pretty important day for the market when we're waiting to hear from the Fed Meta and Microsoft. Let's hear now from Mike Wilson, chief U.S. equity strategist, chief investment Officer at Morgan Stanley. Really great to have you back with us on daybreak. Mike on a morning where we're seeing a modest lift to the future this morning for the most part. But after a big sell off over the last few days, particularly in the chip space, what kind of pressure does that put on the hyperscalers while we wait to hear from them this afternoon? Good morning.
[01:13]
B
Good morning. Yeah, I think the pressure is still on the semiconductor companies more than the hyperscalers, because the hyperscalers are in control of their destiny. I mean, they can decide to spend or not spend. And I think that's where the uncertainty now lies. The market has been sending a very direct signal to the hyperscalers, and that is if you spend more money, your stock is going down. And so I think that what remains to be seen now for the rest of this earnings season is are those companies, the spenders, going to maybe curtail some of their enthusiasm for spending more money? We'll see. You know, we didn't see that last week with Google. You know, maybe we'll see that this week with the other hyperscalers. But generally speaking, the semiconductor stocks have recognized that, hey, the rate of change, you know, the second derivative of the spending is probably going to decelerate at this point, not, you know, go down in negative terms, but deceleration of growth. And let's be honest, I mean, those stocks just got out of bounds and so they, they had to correct.
[02:19]
C
And that's what's going on in your note this week. You talked a bit about seeing a rot to quality amid what's happening in the AI trade story. Where do you see quality in this market right now, Mike?
[02:35]
B
Yeah, well, first of all, that call is a little bit more, you know, I guess not just around this correction. We're seeing in the, in the semiconductor stocks, this is a transition from what we call early cycle to mid cycle. And we've, we've started to see quality, the quality factor start to outperform over the last month. And that makes sense to us because when the rate of change on earnings revisions start to peak out after you know, say a, you know, recovery from a recession, which is what we've had over the last year, then we see a transition to quality. And that's not a sector call, that's a idiosyncratic call. So in other words, we see quality outperforming now within each sector. And in the case of technology, it's a little tricky because historically software has been the area of quality. And so when you have these transitions, what happens is people go right back to software. But because software is threatened now by the invention of AI, that is not an easy call. And so what we're going to see now is even within semis or even within software, we're going to see the higher quality stocks start to outperform the lower quality stocks. Same thing in retail, same thing in healthcare, same thing in industrials. And so we see this as a kind of a call across the market, not a, not an inter sector call.
[04:01]
C
So when it comes to that, Mike, does that point to a broadening when it comes to what could potentially outperform in this market, possibly leading to further gains more broadly on the index level?
[04:15]
B
Yeah, I mean the broadening has been happening really off and on this year. Like before the war, we definitely saw a broadening. Then the war happened and oil prices spiked and the broad, it got narrow again. And then the broadening began to expand in May and we think that continues even with a rotation towards quality. We can see a broadening. And yesterday is a great example. The equal weighted S and P made an all time high yesterday. It was up I think about half a percent. And so this is really the story of 2026 that continues even with the transition to quality. We think more and more stocks are going to participate because the earnings story has been great really this year across many more than. It's not just tech stocks. There's actually a lot of stocks that have been growing earnings for the first time in three years.
[05:05]
C
Only have about 30 seconds left here. We got a Fed decision as well. Given what's happened with communication in the Fed, does that make things a little trickier for equity investors?
[05:16]
B
It definitely makes things noisier and I think that's part of the story too. We're having this transition to early to mid cycle, we're having a transition, we don't know what's going on, the war yet. And then we're having a transition with the Fed. And this is always something that I think a lot of people are highlighting this, including us, that when you get a transition at the Fed with a new chair, the markets tend to get a little bit disrupted. And we're going through that. Still, I don't know if it's going to be solved today. Even if the Fed does nothing today, I'm not sure that answers the question about who Kevin Moore is, what the reaction function is going to be going, doing going forward. And so this, I think this overhang is going to be with us for at least another month or so.
[05:54]
C
Really appreciate you coming on with us, Mike. Again, thanks for joining us. That is Mike Wilson, Chief U.S. equity Strategist, Chief Investment Officer at Morgan Stanley.
[06:02]
A
Whatever your goal, trade show giveaways, client gifts or team gear, 4imprint has the promo products to match. With thousands of options from apparel and drinkware to tech and totes, it's easy to find the right fit for your brand and budget. With standout choices at every price point. And with their 360 degree guarantee, you can be four imprint certain your order will show up just right, right on time. Explore more at 4imprint.com for Imprint for Certain.

Summary4 min read

Bloomberg Talks — "Morgan Stanley's Mike Wilson Talks FOMC Preview, Tech Trade"

Date: July 29, 2026
Host(s): Nathan Hager, Karen Moscow
Guest: Mike Wilson, Chief U.S. Equity Strategist & CIO, Morgan Stanley

Episode Overview

This Bloomberg Talks episode spotlights Mike Wilson of Morgan Stanley, who shares timely insights on current US equity market dynamics amid an anticipated Fed decision, volatility in the semiconductor and tech space, and the evolving AI trade. The discussion centers on shifting investor focus from aggressive tech bets to quality stocks across sectors and what the recent market signals might mean for the broader economy.

Key Discussion Points & Insights

1. Tech Sector Pressures and Hyperscalers

Semiconductor vs. Hyperscalers:
- Mike Wilson observes that semiconductor companies currently feel greater investor pressure than hyperscale tech firms (“hyperscalers”), mainly because hyperscalers can choose their capital expenditure pace, while chipmakers are more directly impacted by demand fluctuations.
  - "The market has been sending a very direct signal to the hyperscalers, and that is if you spend more money, your stock is going down." — Mike Wilson [01:36]
- Hyperscalers are now under scrutiny for their spending, particularly in AI. A possible pullback in "enthusiasm for spending" is anticipated among them, following the recent trend seen with Google.

2. AI Trade and the Rotation to Quality

Earnings Momentum and Factor Rotation:
- We’re witnessing a transition from the “early cycle” to “mid cycle” phase, where “quality” (strong balance sheets, solid earnings) outperforms across sectors.
  - "And we've started to see quality, the quality factor start to outperform over the last month. And that makes sense to us because... after a recovery from a recession... then we see a transition to quality." — Mike Wilson [02:44]
- Within tech, the traditional play for quality was software, but with generative AI’s disruptive impact, the call is now more nuanced and idiosyncratic, even within subsectors like semiconductors and software.

3. Market Broadening and Index Gains

Expanding Participation:
- Wilson notes that while the “broadening” of market gains started, geopolitical events (war, oil price spikes) caused temporary narrowing. However, the breadth has expanded again since May, with the equal-weighted S&P 500 hitting new highs.
  - "Yesterday is a great example. The equal weighted S and P made an all time high yesterday... And so this is really the story of 2026 that continues even with the transition to quality." — Mike Wilson [04:38]
- Many stocks outside of tech are posting fresh earnings growth for the first time in years.

4. FOMC Decision and Fed Communication Risks

Policy Uncertainty and Market Noise:
- With upcoming Fed decisions and a pending new Chair, Wilson cautions that market volatility and uncertainty are likely to persist.
  - "It definitely makes things noisier... when you get a transition at the Fed with a new chair, the markets tend to get a little bit disrupted." — Mike Wilson [05:17]
- Even a “no move” from the Fed today would not, in Wilson’s view, resolve investor anxieties about future policy direction or the reaction function of potential chair Kevin Moore.

Notable Quotes & Memorable Moments

On Tech Spending:
- "If you spend more money, your stock is going down." — Mike Wilson [01:33]
On Sector Leadership:
- "Quality outperforming now within each sector... this is a kind of a call across the market, not an inter-sector call." — Mike Wilson [03:37]
On Uncertainty:
- "I don't know if it's going to be solved today. Even if the Fed does nothing today, I'm not sure that answers the question about who Kevin Moore is, what the reaction function is going to be going, doing going forward." — Mike Wilson [05:41]

Important Segments & Timestamps

[00:36] — Episode introduction and framing questions about tech volatility/Fed anticipation
[01:12] — Wilson on pressure in semis versus hyperscalers
[02:19] — Discussion of market’s “rotation to quality” and the nuances of the AI/software space
[04:00] — Broader index participation, earning growth across sectors
[05:04] — Fed decision, communication risks, and expected market “noise”

Tone and Takeaways

The conversation maintains an analytical, grounded tone, fitting Bloomberg’s audience. Wilson uses precise language and seems cautiously optimistic about broader market gains, but he flags increased uncertainty due to macro and policy transitions.

Summary Table

| Topic | Wilson’s Key Point | Timestamp | |-------------------------------|----------------------------------------------------------------------------------------|----------------| | Tech/Hyperscaler Pressure | “If you spend more money, your stock is going down.” | [01:33] | | Rotation to Quality | Quality stocks now set to outperform across all sectors, not just tech | [02:44]-[03:37]| | Market Breadth | “Equal weighted S and P made an all time high yesterday...” | [04:38] | | Fed and Market Noise | “When you get a transition at the Fed with a new chair, the markets...get disrupted.” | [05:17] | | Future Fed Uncertainty | “Even if the Fed does nothing today... that answers [few questions]...” | [05:41] |

For listeners seeking a quick yet accurate read on the shifting US market landscape, the effects of the AI trade, and the macro-policy backdrop, this episode offers a succinct, top-level overview from inside the institutional investment world.

Loading summary

Transcript12 lines

[00:00]
A
Whatever your goal, trade show giveaways, client gifts or team gear, 4imprint has the promo products to match. With thousands of options from apparel and drinkware to tech and totes, it's easy to find the right fit for your brand and budget. With standout choices at every price point and with their 360 degree guarantee, you can be four imprint certain your order will show up just right, right on time. Explore more@4imprint.com 4imprint for certain
[00:30]
B
Bloomberg Audio Studios Podcasts, Radio news this is Bloomberg Daybreak.
[00:36]
C
I'm Nathan Hager alongside Karen Moscow. Getting ready for a pretty important day for the market when we're waiting to hear from the Fed Meta and Microsoft. Let's hear now from Mike Wilson, chief U.S. equity strategist, chief investment Officer at Morgan Stanley. Really great to have you back with us on daybreak. Mike on a morning where we're seeing a modest lift to the future this morning for the most part. But after a big sell off over the last few days, particularly in the chip space, what kind of pressure does that put on the hyperscalers while we wait to hear from them this afternoon? Good morning.
[01:13]
B
Good morning. Yeah, I think the pressure is still on the semiconductor companies more than the hyperscalers, because the hyperscalers are in control of their destiny. I mean, they can decide to spend or not spend. And I think that's where the uncertainty now lies. The market has been sending a very direct signal to the hyperscalers, and that is if you spend more money, your stock is going down. And so I think that what remains to be seen now for the rest of this earnings season is are those companies, the spenders, going to maybe curtail some of their enthusiasm for spending more money? We'll see. You know, we didn't see that last week with Google. You know, maybe we'll see that this week with the other hyperscalers. But generally speaking, the semiconductor stocks have recognized that, hey, the rate of change, you know, the second derivative of the spending is probably going to decelerate at this point, not, you know, go down in negative terms, but deceleration of growth. And let's be honest, I mean, those stocks just got out of bounds and so they, they had to correct.
[02:19]
C
And that's what's going on in your note this week. You talked a bit about seeing a rot to quality amid what's happening in the AI trade story. Where do you see quality in this market right now, Mike?
[02:35]
B
Yeah, well, first of all, that call is a little bit more, you know, I guess not just around this correction. We're seeing in the, in the semiconductor stocks, this is a transition from what we call early cycle to mid cycle. And we've, we've started to see quality, the quality factor start to outperform over the last month. And that makes sense to us because when the rate of change on earnings revisions start to peak out after you know, say a, you know, recovery from a recession, which is what we've had over the last year, then we see a transition to quality. And that's not a sector call, that's a idiosyncratic call. So in other words, we see quality outperforming now within each sector. And in the case of technology, it's a little tricky because historically software has been the area of quality. And so when you have these transitions, what happens is people go right back to software. But because software is threatened now by the invention of AI, that is not an easy call. And so what we're going to see now is even within semis or even within software, we're going to see the higher quality stocks start to outperform the lower quality stocks. Same thing in retail, same thing in healthcare, same thing in industrials. And so we see this as a kind of a call across the market, not a, not an inter sector call.
[04:01]
C
So when it comes to that, Mike, does that point to a broadening when it comes to what could potentially outperform in this market, possibly leading to further gains more broadly on the index level?
[04:15]
B
Yeah, I mean the broadening has been happening really off and on this year. Like before the war, we definitely saw a broadening. Then the war happened and oil prices spiked and the broad, it got narrow again. And then the broadening began to expand in May and we think that continues even with a rotation towards quality. We can see a broadening. And yesterday is a great example. The equal weighted S and P made an all time high yesterday. It was up I think about half a percent. And so this is really the story of 2026 that continues even with the transition to quality. We think more and more stocks are going to participate because the earnings story has been great really this year across many more than. It's not just tech stocks. There's actually a lot of stocks that have been growing earnings for the first time in three years.
[05:05]
C
Only have about 30 seconds left here. We got a Fed decision as well. Given what's happened with communication in the Fed, does that make things a little trickier for equity investors?
[05:16]
B
It definitely makes things noisier and I think that's part of the story too. We're having this transition to early to mid cycle, we're having a transition, we don't know what's going on, the war yet. And then we're having a transition with the Fed. And this is always something that I think a lot of people are highlighting this, including us, that when you get a transition at the Fed with a new chair, the markets tend to get a little bit disrupted. And we're going through that. Still, I don't know if it's going to be solved today. Even if the Fed does nothing today, I'm not sure that answers the question about who Kevin Moore is, what the reaction function is going to be going, doing going forward. And so this, I think this overhang is going to be with us for at least another month or so.
[05:54]
C
Really appreciate you coming on with us, Mike. Again, thanks for joining us. That is Mike Wilson, Chief U.S. equity Strategist, Chief Investment Officer at Morgan Stanley.
[06:02]
A
Whatever your goal, trade show giveaways, client gifts or team gear, 4imprint has the promo products to match. With thousands of options from apparel and drinkware to tech and totes, it's easy to find the right fit for your brand and budget. With standout choices at every price point. And with their 360 degree guarantee, you can be four imprint certain your order will show up just right, right on time. Explore more at 4imprint.com for Imprint for Certain.