EddieJayonCrypto
26 May 25
Morgan Stanley's chief investment officer, Mike Wilson, forecasts a 10% decline in the US dollar, which is expected to support risk assets like the S&P 500 into 2026. This prediction is based on anticipated Federal Reserve interest rate cuts. Even if rate cuts are smaller than expected, the dollar i...
Morgan Stanley forecasts a 10% decline in the US dollar driven by expected Federal Reserve rate cuts, which could boost the S&P 500 and limit its downside correction.Morgan Stanley's chief investment officer, Mike Wilson, predicts that the US dollar will weaken by 10%, supporting risk assets such as the S&P 500 into 2026. This forecast is grounded in anticipated Federal Reserve interest rate reductions.Even if the rate cuts are smaller than expected, the dollar is still projected to decline, especially against currencies like the Japanese yen and the British pound. Wilson highlights that the dollar's depreciation provides an additional tailwind for the S&P 500, making a correction of more than 10% difficult.Wilson explained in a recent interview that their mid-year update forecasts a 10% drop in the US dollar continuing into next year, creating favorable conditions for 2026’s market performance.The expected dollar decline depends on the magnitude of Federal Reserve cuts: a 175 basis point reduction could lead to a 10% fall, while a smaller 100 basis point cut would result in a less pronounced decline. Regardless, the direction is clear — a southward trend for the dollar, particularly versus the yen and pound, which have less scope for monetary easing.This outlook reflects broader market expectations and signals potential opportunities for investors seeking exposure to US equities amid currency shifts.