Morgan Stanley Analyst Recommends Investors Buy The Dip Following Moody’s US Credit Rating Cut

Morgan Stanley analyst Michael Wilson recommended investors buy dips in U.S. stocks following Moody’s credit rating cut on Friday.

According to a Bloomberg report, Wilson wrote in a recent note that there is a high chance of a pullback in U.S. equities with bond yields surging following Moody’s rating cut.

However, the analyst said, they would be buyers of such a dip. 

Major U.S. benchmark indices opened in the red on Monday, following Moody’s rating action announcement on Friday.

At the time of writing, the Dow Jones was down 0.16%, the S&P 500 was down 0.30%, and the tech-heavy Nasdaq 100 index was down 0.40%.

Moody’s is the last among its peers to downgrade the U.S. credit rating—in a note on Friday, the brokerage slashed the rating one notch to Aa1 from Aaa.

“This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” the firm said in its ratings action announcement.

Treasury yields spiked following Moody’s announcement. The 30-year Treasury yield surged past the 5% mark earlier on Monday and was hovering at 4.964% at the time of writing, rising five basis points.

The 10-year Treasury yield rose six basis points to 4.499%, while the two-year Treasury yield edged up by one basis point to hover at 3.993%.

Silver Lining

Wilson sees a silver lining in the clouded economic environment caused by President Donald Trump’s tariffs.

He noted that the corporate earnings season has shown no major impact due to Trump’s tariffs, and a slew of recent profit upgrades is another green sign.

The trade deal with China has also reduced the chances of a recession, he said.

“While we’re respectful of this potential outcome, we think the probability that the market looks through such weakness and deems it temporary just went up because of the trade agreement with China,” Wilson added.

The analyst isn’t alone in his optimism – Louis Navellier, founder of Navellier & Associates, said in a recent note that S&P 500 earnings so far stood at an 11.2% annual pace, which is the seventh straight quarter of earnings growth acceleration.

“Nvidia will be the grand finale for the first quarter earnings announcement season should boost the overall earnings pace of the S&P 500.  I should add that the S&P 500 earnings are forecasted to have double-digit earnings growth for the remainder of the year,” he added.

Ryan Detrick, chief market strategist at Carson Group, observed in a post on X that after previous ratings cuts, the S&P 500 gained 18.8% and 20.8% in the following year.

“Don’t get too worked up over this,” he said, adding that Moody’s cuts won’t impact equity markets.

Meanwhile, the SPDR S&P 500 ETF Trust (SPY) was down by 0.16%, while Invesco QQQ Trust (QQQ) fell 0.29%.

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