Top analyst still thinks we’re on the cusp of a new boom for the economy, but investors aren’t with him: ‘Markets remain choppy’

His optimism was confirmed by the economy surprising to the upside consistently throughout 2025, with skeptics warning that the impact of tariffs and broader macroeconomic uncertainty would certainly soon show up in the data. Third-quarter earnings gave Wilson a bit of pause, he wrote Monday: That doesn’t mean he thinks his thesis is wrong, but it just suggests that investors get nervous when they digest the state of play. “This remains a non-consensus view in our conversations.”

“Markets remain volatile,” Wilson wrote Monday, adding that “unresolved risks” weigh heavily on traders’ minds. Much of his discussion centered on the fact that most companies simply don’t raise guidance much; Expectations continue to decline to where they stabilized after the “Liberation Day” tariff announcement in April. He also discussed the mid-week swoon on October 16, in which mid-sized banks revealed murkier earnings than their Wall Street counterparts, prompting JP Morgan CEO Jamie Dimon to describe a “cockroach” moment: “When you see one cockroach, there are probably more.”

Wilson asserts that the US economy is poised for a “renewed recovery” with an early cycle rebound over the next six to twelve months. He wrote on Monday that his thesis remains sound despite current volatility and tepid investor sentiment. If trade tensions ease and EPS revisions stabilize, along with improved liquidity, that could set the stage for a strong rally in the stock, he said. Political developments, including trade negotiations expected at the upcoming APEC summit, are seen as potential catalysts. However, Wilson added that he was braced for a “further near-term correction”, or in other words, a disgusting drop in stocks, before declaring that “all is clear” for stocks. He pointed to recent pressures in the credit market, funding fluctuations, and renewed scrutiny of regional banks after sudden credit losses at several institutions.​

Mixed signals: Strong expectations meet weak earnings

Earnings season has just begun, with a particular focus on the financial sector. Early results show that total EPS surprises are strong, averaging nearly 6%, above the historical average. However, the market reaction was tepid, with stock prices showing muted to negative responses even after earnings beat – an unusual pattern that many attribute to persistent macroeconomic uncertainty. In short, companies beat expectations, but investors appear far from convinced, especially in economically sensitive sectors such as regional banks and capital goods, where fundamental risks remain.

While leading analysts paint a picture of an imminent recovery, their view is significantly “out of consensus” compared to the broader investment community. The backdrop is a historically high level of stock-specific risk. The dispersion in earnings revisions is also on the rise, suggesting a strong opportunity for skilled stock pickers, but also highlighting the level of uncertainty permeating the current market.

Investor anxiety: Volatility, credit concerns, valuations

The prevailing mood in the broader market remains cautious. Last week, the VIX index — Wall Street’s fear gauge — rose to its highest level since April before retreating, amid new trade policy uncertainty. Index-level metrics, such as the range of S&P 500 earnings revisions, fell from previous highs but remained in line with typical seasonal patterns. Regression analyzes indicate that the S&P 500 is fairly valued at current earnings levels; However, any further decline in earnings momentum could weigh heavily on the stock unless the much-discussed “leg up” next materializes.

One major concern among investors is the beleaguered situation of regional banks, which have seen their share price performance decline after revelations of unexpected credit charges. This in turn has led to concerns that problems in one of the most economically sensitive corners of the market could spread or require more internal reviews, keeping financial stocks in limbo until there is greater clarity. Year-to-date, regional bank stocks and alternative asset manager stocks remain underperforming, and more broadly, large swaths of the market remain trapped in a risk-off mentality.

The way forward: opportunities and risks

Despite these major risks, Wilson does not back down from his optimistic thesis. His team highlighted aspects of notable resilience, such as strong demand for cruise bookings through 2027, a rise in advertising revenues, continued AI-driven growth in technology, healthier-than-expected corporate travel, and an encouraging, if uneven, outlook for consumer spending. Wilson also notes that companies may have an easier time winding down expectations as they close out the year, because while this is “unusual” they did not raise guidance much in recent earnings, it was actually lowered in April and has remained steady since then. Therefore, it may be possible to clear a low bar.

However, for investors to engage in optimism, several hurdles must be cleared: a definite cooling in trade, stabilization of earnings revisions, and sustained improvements in market liquidity. Until then, the tension between analyst optimism and investor skepticism is set to set the tone for markets heading into 2026.

For this story, luck Use generative AI to help with the rough draft. An editor verified the accuracy of the information before publication.