Mike Wilson: Market Bad Breadth "Must Be Resolved One Way Or Another" And It All Hinges On Bond Vol

Two weeks ago, Morgan Stanley's Mike Wilson, who had been one of Wall Street's louder bulls for much of the past year, warned that higher yields and energy prices could spark a 10% market drop (Sep 22), with the S&P sliding as low as 7,100 before the bull market resumes. Now (one 10Y print above 5.3% later) Wilson is back with a follow-up that tackles the question everyone on a trading desk has been asking: how does an index sitting just below all-time highs reconcile with a market where half the stocks have already suffered bear-market drawdowns?

His answer, in the latest Weekly Warm-up titled "How Will the Market Fix Its Bad Breadth?" (available to pro subs), is that it depends almost entirely on one thing: bond volatility.

Half The Market Has Already Had Its Bear Market