<div id="readability-page-1">Morgan Stanley's Mike Wilson warns equities face their first meaningful correction since late March if bond volatility persists, even as the bank raises its 12-month S&amp;P 500 target to 8,300.Before you go on, Trump reacted to rising yields and falling stocks, as he reliably does, with a TACO:<ul><li>Trump: Stops the planned attack on Iran on request from Saudi's and UAE</li><li>Trump says good chance of Iran deal after Gulf states secure attack pause</li></ul>Back to Morgan Stanley. Summary:<ul><li>Equities face a significant pullback risk if bond market volatility intensifies and long-term yields continue to rise</li><li>The S&amp;P 500 pulled back from an all-time high late last week, with futures pointing to further losses on Monday</li><li>Inflation fears tied to prolonged elevated energy prices from the Iran conflict have pushed Treasury yields higher across the curve, with the 30-year at its highest in nearly three years</li><li>Japanese yields also surged to multi-decade highs</li><li>Morgan Stanley raised its 12-month S&amp;P 500 target to 8,300 last week, citing the strongest earnings growth in more than two decades outside of major shock recoveries</li><li>Wilson flagged that investors have underestimated how broadly profit growth has extended beyond AI names, but noted positioning for that broadening remains limited</li><li>A resolution to the Iran conflict is seen as the key prerequisite for yields to retreat and the broadening earnings trade to accelerate</li></ul> Morgan Stanley strategists are warning that the global bond selloff poses a serious threat to equity markets, with the AI-driven stock rally at risk of its first meaningful correction since markets bottomed at the end of March.The team led by Mike Wilson said in a note that if bond market volatility intensifies and long-term interest rates continue to climb, a significant pullback in equity prices should be expected. The S&amp;P 500 retreated from a record high late last week, and equity index futures pointed to further losses at the start of the new week, giving the warning immediate relevance.The catalyst is familiar. Inflation fears driven by persistently elevated energy prices tied to the Iran conflict have pushed Treasury yields higher across the maturity spectrum. The 30-year yield rose to its highest level in nearly three years, while Japanese yields surged to levels not seen in several decades, underscoring that the bond pressure is not a purely American phenomenon. Wilson tied the Treasury selloff directly to surging oil prices and a strong economy, while noting that the Federal Reserve's increasingly hawkish tone under new chair Kevin Warsh is amplifying the move. A lasting resolution to the Iran conflict, he argued, is what bond markets need before rates can meaningfully retreat.Despite the near-term caution, Morgan Stanley maintained its longer-term bullish stance on equities. The bank raised its 12-month S&amp;P 500 target to 8,300 last week, underpinned by what it described as the strongest earnings growth in more than two decades, excluding recoveries from major economic shocks.Wilson identified a broadening of that earnings recovery as the trade that markets are most poorly positioned for. Profit growth has extended well beyond the core group of AI beneficiaries, he argued, but investor appetite to position for that broadening remains limited. The key triggers to watch, in his view, are oil prices and yields pulling back from recent highs, developments that hinge heavily on progress toward ending the Iran conflict. ---The 30-year Treasury yield hitting its highest level in nearly three years is the number that equity markets need to watch most closely, as it represents the discount rate pressure point at which stretched valuations on AI-driven growth stocks become hardest to defend. Wilson's framework puts the onus squarely on an Iran conflict resolution to bring rates back down, meaning geopolitical newsflow is now a direct input into equity positioning decisions. A broadening earnings recovery is the longer-term bullish case, but it remains largely unpriced, leaving the market vulnerable to a rates-driven unwind before that thesis gets the chance to play out.</div>

.SPX

SPXU

UPRO

Morgan Stanley's Mike Wilson warns that equities may face a significant correction if bond market volatility continues, despite raising the 12-month S&P 500 target to 8,300. The S&P 500 has recently retreated from record highs, influenced by rising Treasury yields due to inflation fears linked to the Iran conflict. A resolution to this conflict is seen as crucial for stabilizing yields and supporting broader earnings growth, which remains underappreciated by investors.

- Morgan Stanley's Mike Wilson warns that equities risk a significant correction if bond market volatility continues and long-term yields rise.  
- The S&P 500 has already pulled back from a record high amid inflation fears linked to the Iran conflict, with the 30-year Treasury yield reaching its highest level in nearly three years.  
- While the bank maintains a bullish long-term outlook, raising the S&P 500 target to 8,300, it emphasizes that a resolution to the Iran conflict is crucial for stabilizing rates and ensuring broader profit growth.

Investinglive

S&P 500

Pro UltrPro Shrt S&Pro 500

VG S&P 500

SPDR S&P 500

iShares Core S&P 500

Pro UltrPro S&Pro 500

Morgan Stanley

MORGAN STANLEY DEP SHS EA REP 1/1000 SHS NON CUM PFD O

MORGAN STANLEY DEP SHS REPSTG 1/1000TH PFD SER Q

MORGAN STANLEY DEP SHS REPS 1/1000 7.125% PFD E

MORGAN STANLEY NON-CUM DEP SH REP 1/1000 PFD SER I

MORGAN STANLEY 4.875 DEP SHS REP 1/1000 NCUM PFD SR L

MORGAN STANLEY 6.5%DEP SHS REPSTG 1/1000 NON CUM SER P

MORGAN STANLEY DEP SHS REPS 1/1000 PFD SER 'A'

MORGAN STANLEY DEP SHS REPR 1/1000TH INT PFD SER 'F' FX

MORGAN STANLEY DEP SHS REP 1/1000 NON-CUM PFD STK SER K

Morgan Stanley warns bond rout could trigger equity correction, still sees S&P500 @ 8300