This Expert Says the S&P 500 Has ‘Crashed Under the Surface.’ What a Stealth Correction Means.

_Looking under the hood of the S&P 500, stocks have “basically crashed,” according to Morgan Stanley’s Mike Wilson.
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Crystal Kim

Fri, February 27, 2026 at 7:38 AM GMT+9 2 min read

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Key Takeaways

Morgan Stanley's Mike Wilson said that the spread between the top performing 50 stocks and the bottom 50 is wider than it was during the Great Financial Crisis.

The question of the moment is whether the S&P 500 needs to "catch down" to complete the correction.

A stealth correction in the market is in progress, according to one expert.

Looking under the hood of the S&P 500, stocks have “basically crashed,” Mike Wilson, Morgan Stanley’s chief US equity strategist, said in an interview with CNBC Thursday morning. Investors shouldn’t ignore the signal in that volatility at the index level has been relatively muted, but individual stocks are seeing wilder swings, he said.

The S&P has moved in a tight range in the last couple of months, eking out gains one day, and then giving them back the next. That was visible on Thursday, with the benchmark index, as well as the tech-heavy Nasdaq, pulling back after posting big gains the previous two sessions. While, Wilson isn’t calling for a bear market—his base case suggests the S&P 500 could rise 13% from recent levels—investors should be watching for downside risk in the next six weeks, he said.

WHY THIS MATTERS TO YOU

Investors may, in the near-term, want to see the trees for the forest, flipping the old idiom on its head. While the S&P hasn’t done much so far this year, individual stock performance suggests a correction is underway, according to market experts.

Evidence of the crash is in the difference in returns between individual stocks, or dispersion. “The spread between the top 50 stocks and the bottom 50 stocks year-to-date, okay, is 68%,” Wilson said, “That’s the biggest spread we’ve seen in 20 years.”

The good news is that the correction at the stock level is 70% to 80% done, per Wilson, but the question investors have to ask themselves is, “Does the index now need to catch down to complete the correction?” (Before it can rally in earnest in the back of the year.)

The idea of a stealth market crash is unlikely to assuage investors who have seen pockets of the market get rolled over by concerns of AI doom scenarios or otherwise. However, Wilson says the opportunity for investors now is in the stocks that have been battered, and not in the winners.

Generally, Morgan Stanley is positive on the outlook for U.S. equities. The firm’s year-end target for the S&P at its base case is 7,800. Wilson remains bullish, especially for the second half of the year—if company earnings exceed the already-high expectations, money could return to the market, he said.

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