Thoughts on the Market: "A New Bull Market Begins?"

Host: Mike Wilson, Morgan Stanley CIO and Chief U.S. Equity Strategist
Date: September 8, 2025

Episode Overview

In this episode, Mike Wilson examines the implications of the latest U.S. nonfarm payroll report and evaluates what it signals about the equity markets. Wilson contextualizes the data within his ongoing thesis of a “rolling recession” and suggests that investors may be witnessing the early days of a new bull market. He emphasizes the importance of looking past headline economic metrics to better understand the true health of the market and anticipates shifts in policy responses, like Federal Reserve rate cuts, and their potential impacts on market growth.

Key Discussion Points & Insights

1. Labor Market Data: Limitations & Interpretations

• Backward-Looking and Revisions:

  • Wilson stresses that "the labor market data is perhaps the most backward looking of all the economic series" (00:19), and is highly susceptible to significant revisions, making it unreliable in real-time.
  • Historical revisions tend to be "pro cyclical," amplifying downturns and recoveries.

• Current Payroll Report Interpretation:

  • The most recent payroll report "supports our view the labor market is weak. However, this is old news to the equity market as we've been discussing for months." (00:10)
  • Recent revisions were "better than last month's by a wide margin, suggesting the labor market bottomed in the second quarter." (01:05)

2. The Rolling Recession & the New Cycle

• Rolling Recession Thesis:

  • Wilson reiterates his belief that "a rolling recession began in 2022 and finally bottomed in April" (01:18), with different sectors entering recessionary phases at different times, thus avoiding typical recessionary spikes in economic metrics.

• Economic Distortions:

  • Significant factors, like "the historically significant rise in immigration post COVID 19 and subsequent enforcement this year," have distorted labor market measures. (02:10)

• Transition to Recovery:

  • The weak labor report "provides further evidence of our thesis that we are now transitioning from a rolling recession to a rolling recovery" (02:23).

3. Fed Policy, Market Dynamics & Investor Strategy

• Rate Cuts and Bull Market Outlook:

  • "We're entering a new cycle environment and the Fed cutting interest rates will be key to the next leg of the new bull market that began in April." (02:37)
  • Acknowledges that the Fed might remain inflation-focused, potentially slowing the pace of rate cuts.

• Market Underlying Weakness:

  • "The economy has been much weaker for many companies and consumers over the past three years than what the headline economic statistics like nominal GDP or employment suggest." (02:55)
  • Suggests using earnings growth, breadth, and confidence surveys as better measures of economic health.

• Investor Approach:

  • Notes that "it would not surprise me if equity markets go through some consolidation or even a correction during this seasonally weak time of the year." (03:30)
  • Advises: "Should that happen, we would be buyers of that dip and likely even consider moving down the quality curve in anticipation of a more dovish Fed." (03:42)

Notable Quotes & Memorable Moments

• On Labor Market Data's Limitations:
  "It's particularly prone to major revisions that tend to make the current data unreliable in real time, which is why the National Bureau of Economic Research typically declares a recession started at a time when most were unaware we were in one." (00:30)

• On the April Recovery:
  "Friday's revisions were better than last month's by a wide margin, suggesting the labor market bottomed in the second quarter." (01:05)

• Defining True Economic Health:
  "Perhaps the simplest way to determine if an economy is doing well or not is to ask: Is it delivering prosperity? Broadly on that score, we think the answer is no." (02:58)

• Bull Market Outlook:
  "A new bull market for equities began with a trough in the rolling recession that began in 2022. It's still early days for this new bull, which means dips should be bought." (04:03)

Timestamps for Important Segments

• 00:00–00:50: Critique of labor market report data and its backward-looking nature
• 01:05–01:30: Insights from recent payroll revisions and the bottoming labor market
• 01:40–02:25: Explanation of the rolling recession and its impact on traditional economic indicators
• 02:37–03:10: Transition from recession to recovery; Fed policy's prospective role
• 03:30–04:03: Market correction expectations and investment guidance

Summary Flow

Mike Wilson delivers a thorough analysis of both the latest payroll data and broader economic trends. He maintains Morgan Stanley’s ongoing standpoint that the recession has played out in a rolling, sector-specific fashion since 2022, rather than through a sharp, economy-wide downturn. With evidence mounting that economic conditions reached their nadir in April 2025, Wilson posits that the groundwork is laid for a new bull market in equities, where rate cuts by the Federal Reserve will be central. He continues to recommend a strategic, optimistic stance for investors—buying into market dips—while warning that headline statistics may distort the economy’s true vitality.

Bottom Line:
A new bull market appears underway, rooted in an April trough following a protracted, rolling recession. Investors are encouraged to view any dips in this early-stage recovery as buying opportunities, provided they account for lingering economic ambiguities and the slower-than-ideal policy response.