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One of Morgan Stanley’s top executives says that the US dollar is set for further declines, likely providing a boost to risk assets.
In a new interview on Bloomberg Television, Morgan Stanley chief investment officer Mike Wilson says that the bank is forecasting a big drop for the US dollar, potentially giving another tailwind to the S&P 500.
“Our forecast for the dollar, by the way in this mid-year update, is for another 10% decline. So that continues into next year. That’s what’s going to provide another tailwind for 2026, it’s just another reason that the S&P [500] has a really hard time correcting more than 10%.”
According to Wilson, the bank’s call on the dollar dropping 10% is based on the expectations that the Federal Reserve will cut interest rates.
However, the banker says even if the Fed isn’t as aggressive as Morgan Stanley thinks, the overall trend for the dollar remains down.
“If our call on 175 basis points of rate cuts next year proves to be true, you’ll get a 10% decline. If it’s only a hundred basis points of cuts, it’ll be less. But the direction of travel is south for the dollar, particularly against the yen, which they’re not going to be cutting rates anytime soon. Or even against [the euro], also the pound, because they don’t have as much room to cut in a slowdown.”
