Morgan Stanley Says US Market Correction Is Nearing Its End
Direct answer
Morgan Stanley strategists said on November 2, 2026 that the US stock market correction that began in June is in its final innings. In simple terms, they think the worst of the broad pullback may be close to over, even though they warn that more trouble is still possible.
What happened
Morgan Stanley strategists, led by chief US equity strategist Michael Wilson, said the November 3 midterm elections should help remove a major market overhang. They called the elections a clearing event, meaning that once the result is known, one big source of uncertainty goes away.
They pointed to how widespread the damage already is. About 60 percent of Russell 3000 stocks have already fallen at least 20 percent since June. The Russell 3000 is a broad index that covers most US listed stocks, so that figure shows the selloff was not limited to a few big names.
They also said the S and P 500 is now catching down to weaker market breadth. Breadth is a simple idea: it asks how many stocks are rising, not just whether the headline index is rising. When breadth is weak, only a few stocks carry the market. When the main index falls to meet that weaker breadth, strategists often see it as a late stage of a slump.
The strategists also flagged a possible source of relief that does not depend on the Federal Reserve cutting rates. They said relief could come from the US Treasury spending down its cash pile, from about 1.05 trillion dollars to about 850 billion dollars by year end. When the Treasury spends down cash, it can add liquidity to the financial system without a rate cut.
Why it matters for beginners
A correction is a fall from a recent peak, not a crash with a fixed definition in everyday news use. This correction began in June, so it has lasted months, not days. That matters because beginners often focus only on the headline index, while this note focuses on how many individual stocks have already fallen a lot.
The history point in the note is also worth understanding carefully. Morgan Stanley said large cap stocks have typically gained about 15 percent in the six months following election results. That is a past pattern, not a promise about what will happen this time. Past patterns can break, especially if new risks appear.
The note also shows why the US stock futures rebound on November 2, covered in our earlier post on US stock futures rising as AI stocks steadied after a brutal October, is not the same as a confirmed recovery. A one day rebound can happen inside a longer correction.
What to watch next
First, watch the November 3 midterm results and how markets react in the days after, not just on election night. A clearing event removes uncertainty, but it does not decide what policies follow.
Second, watch Apple earnings after the November 2 close and other big tech results this week. Morgan Stanley warned that the risk of a correction led by AI company earnings has kept markets on edge, so weak results could still trigger another leg lower.
Third, watch for renewed military escalation with Iran or new tariffs, which Morgan Stanley named as the bigger risk after the vote. Either could change the outlook quickly.
Fourth, watch Treasury cash levels and whether the expected drawdown toward about 850 billion dollars by year end actually happens, and whether it eases financial conditions as the strategists suggest.
FAQ
What does final innings mean here?
It is a baseball phrase for the late stage of a game. Morgan Stanley used it to say the correction may be near its end, not that it is certainly over.
Does this mean stocks will now rise?
No. The strategists said near term clearing events could provide an attractive opportunity to add risk to quality companies that have fallen in price, but they also warned about AI earnings, Iran, and tariffs. That is a view, not a guarantee.
What is market breadth?
Breadth measures how many stocks are rising or falling, rather than just the level of one index. Weak breadth means gains are narrow. Improving breadth can be a sign that a recovery is broader based.
Why do midterms matter to markets?
Elections can change tax, spending, and regulation plans. Until the result is known, investors must guess. Once it is known, they can adjust plans, which is why strategists call elections a clearing event.
