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Moody's (NYSE:MCO) just knocked down the U.S. credit rating, pushing 10-year Treasury yields past 4.5% and sending S&P 500 futures tumbling 1.2%. It's the third major agency to pull America's top-tier badge, citing ballooning deficits and political gridlock. But amid the noise, Morgan Stanley's Michael Wilson is telling clients not to flinch. Yes, a short-term dip could be coming. No, it's not time to sell everything. In fact, Wilson wrote, we would be buyers of such a dip. His rationale? Recession risks just dropped, thanks to the temporary trade truce with China.
Wilson believes the market could start treating economic weakness as transitorya word investors haven't heard much since 2021. The S&P 500 may be trailing international peers this year, but earnings season wrapped with fewer tariff scars than expected. Even better, profit upgrades are ticking up again. Wilson, who warned earlier this year that volatility would linger into H2, now sounds more constructive. The new message: if there's a pullback, use it. The reset may give U.S. stocks a shot at reclaiming leadership as global uncertainties ease.
Meanwhile, Goldman Sachs strategist David Kostin is watching the tech titans. He expects the Magnificent Sevenincluding Tesla (NASDAQ:TSLA)to bounce back and outpace the broader S&P 500 (SPY), driven by strong earnings momentum. While these names have taken a hit amid higher-for-longer rate fears, Goldman sees them as too profitable to stay down for long. With trade tensions cooling and corporate profits holding up, the recent fear-driven selling could turn out to be a giftat least for investors ready to act.
This article first appeared on GuruFocus.