tl;dr
Morgan Stanley's Dan Skelly asserts the US economy has 'incredible upward momentum,' with AI driving growth and making a major market correction unlikely. The firm rejects 'bubble' fears, citing historical data and AI's structural impact on tech stocks.
**Morgan Stanley: US Economy’s Strong Momentum Makes Market Correction Unlikely, AI Drives Growth**
In a recent interview on CNBC Television, Dan Skelly, managing director of wealth management at Morgan Stanley, emphasized that the U.S. economy is experiencing “incredible upward momentum,” and a significant stock market correction is highly unlikely. Skelly’s remarks underscore the firm’s confidence in the resilience of the current market, fueled in part by the rising influence of artificial intelligence (AI).
**Economy Shows Unyielding Strength**
Skelly highlighted that the U.S. economy has surpassed a traditionally weak seasonal period, defying expectations of a pullback. “Everyone was expecting that pullback. So it’s telling you a couple of things. First, the economy continues to have a tremendous amount of momentum,” he said, citing recent GDP revisions as evidence. He noted that the AI “supercycle” is driving growth, particularly in the big tech mega-cap stocks, which have remained resilient despite market fluctuations.
While a consolidation period was anticipated, Skelly argued that the ongoing economic momentum and AI-driven narrative are preventing a major correction. “We would just say we’ve been due for a consolidation. Although the momentum in the economy and the AI story continues to suggest it won’t be a huge correction,” he added.
**Rejecting the “Bubble” Narrative**
Morgan Stanley also dismissed concerns about the market being in a bubble. Skelly pointed to historical data, noting that since 1950, there have been five bull markets with an average duration of eight years. “We’re two and a half plus years since the ChatGPT lows in October, November of 2022. So we don’t think we are close to a bubble-like condition,” he said.
He further compared current market conditions to the 1999 tech bubble, when the Nasdaq was 50% above its 200-day moving average. Today, the index is only 12% above that benchmark, signaling it is “nowhere near as extended” as it was during the previous cycle. “The AI story is different. It’s not just a speculative bubble—it’s backed by real economic momentum and innovation,” Skelly explained.
**Implications for Investors**
Skelly’s comments reflect Morgan Stanley’s broader outlook that the current market environment is sustainable, driven by structural shifts in technology and a robust economy. While short-term volatility remains possible, the firm’s analysis suggests that the combination of AI advancements and economic resilience is positioning the market for continued growth rather than a sharp downturn.
As investors navigate this dynamic landscape, Morgan Stanley’s perspective offers a cautious but optimistic view, emphasizing the importance of distinguishing between temporary market fluctuations and long-term trends. The firm’s confidence in the AI-driven economy and its historical context may provide reassurance to those wary of a potential correction.
In summary, Morgan Stanley’s analysis paints a picture of a U.S. economy and stock market that are not only resilient but also poised for continued expansion, driven by innovation and sustained momentum.