The best analyst says you were not crazy to think that the economy was worse than it seemed in the past 3 years. The “rolling recession” has just ended

The chief strategist of the American actions of Morgan Stanley, Mike Wilson, said that the August report is in fact more confirmation of its main thesis which dates back several years. “At the heart of our opinion,” wrote Wilson’s team in a note published on the morning of September 8, “the idea that the economy has been much lower for many companies and consumers in the past 3 years than what the economic statistics like nominal GDP suggest.”

In other words, in the midst of the numerous forecasts of a recession about to hit the American economy or a renewal of style stagflation from the 1970s, Wilson struck the drum that the recession was already there, just disguised. The good news is that if a recession was disguised, the current Haussier market and at an early stage has also been: “The low work report on Friday provides additional evidence of our thesis that we are now going from a rolling recession to a rolling resumption. In short, we are entering an early cycle environment and that Fed’s cup rates will be essential at the next stage of the Taurus market which started in April. ”

The “hilly recession”: what happened?

According to Wilson and his team from Morgan Stanley, the recession has never materialized as a sudden collapse or a clear point in unemployment. Instead, weakness has moved the sector by pandemic winners and consumer goods to the rest of the economy, each industry undergoing its own slowdown at different times. This “hilly recession” meant the usual markers of large economic pain – unemployment and unemployment, GDP in deterioration – has remained silent even if a weakness mounted under the surface. “We have seen most of the economy sectors go through their own individual recessions at different times,” said the bank.

Several factors have contributed to this slow pain. The post-country immigration climbs, followed by a stricter application, have distorted many traditional signals in the labor market and a real-time obstruction disorder of flagship statistics. The growth in median profits of the Russell 3000 index companies has remained negative for three years – but the global stock market seems to avoid an accident, until recently.

Was the Liberation Day the background?

Morgan Stanley said in April 2025, when the White House announced new prices in a move nicknamed the “Liberation Day”, as a hollow of the recession. Around this inflection point, the indicators for carrying out profits – an indirect indicator for works councils – have made it possible to rebound dramatic and in the form of a V “for the first time since the early recovery of the pandemic. Payroll revisions and job removal data also corroborated the substance, culminating last spring and down since.

“History suggests that these revisions are pro-cyclical, which is more negative in a recession and more positive once the recovery has started,” notes the strategists. “It seems that this time is not different.” The last net rebound of the month in the payroll revisions supports the idea that the hilly recession is over, Wilson wrote, inaugurating a new environment at the start of the cycle.

Morgan Stanley’s team argues that economic data – nominal GDP, general jobs – reality and often lack underlying weakness. The classic models failed to identify the hilly nature of the recession because the sectors fell and restored to different times. Government hiring has masked private sector pain and the disruption of the supply chain, consumer confidence reductions and the growth in persistent negative median profits have painted a more real image.

Wilson maintains that examining the growth in profits as well as surveys of consumer and businesses is a “better way to measure the health of the economy”. According to these measures, the growth in profits has been negative for most companies in recent years, supports Wilson, and the rebound in the form of a V in the benefits of profits shows that the confidence of companies “has improved materially since the day of the liberation”.

Bull market to come?

Morgan Stanley projects the rate reductions in the federal reserve – in progress from a reduction of 100 base points triggered by the weakness of the work last summer – will feed a lasting rebound. The new cycle, according to strategists, “sets up a solid finish at the end of the year and 2026”, provided that monetary policy remains sufficiently reactive to support growth.

Equity strategists recommend “piercing” for volatility in the coming months, because seasonal hacks and monetary uncertainty persist, but ultimately predict the recovery of wide gains and new peaks of all time, especially since the Fed Cup cycle begins firmly. Sectors such as great capitalization health care, in particular, offer a defensive value and a profit dynamic in this transition, while small ceilings can catch up later as recovery widens.

Morgan Stanley’s call marks a change in the way Wall Street interprets “recession”. Rather only one event, slowdowns can come in waves, culminating at different times in the economy. For investors, the end of this rolling recession not only indicates a relief but a renewed opportunity: the next Haussier market now takes shape as the fundamentals improve and that the monetary conditions are supported.

For this story, Fortune Used a generative AI to help an initial project. An editor checked the accuracy of the information before the publication.

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