How Morgan Stanley’s Top Analyst Got Every Major Market Call Wrong in 2025 — and Still Kept His Job

Only at a certain height, somewhere between the green room of a financial television network and the 40th floor of a Midtown Manhattan tower, can one feel a certain kind of confidence. It is the assurance of a man who has made mistakes in the past, is aware of them, and still hopes to be taken seriously. Perhaps the best recent example of this phenomenon was provided by Morgan Stanley’s equity research division in 2025. It was difficult to avoid feeling both frustrated and strangely unsurprised as I watched it happen.

The tone at the start of the year felt almost scripted. The kind of macro anxiety that tends to make analysts who sound serious sound even more serious arrived in early April. The likelihood of a recession was being tossed around like wake confetti.

The language used was serious, urgent, and technical—the kind of framing that turns financial television into a nature documentary about an impending catastrophe. One by one, Wall Street voices, including well-known individuals connected to Morgan Stanley’s research apparatus, leaned toward the doomsday narrative with a degree of certainty. Not likelihood. assurance.

Then, starting on April 8th, the S&P 500 increased by 18.1%. Not gradually. Defiantly, sharply, as if the market had been paying attention and had chosen to voice its opinions.

Pausing on that number is worthwhile. An 18% move in about five weeks is neither a technical blip nor a rounding error. That is the kind of historically significant rally that is discussed in retrospectives and used in case studies at business schools regarding sentiment, positioning, and the discrepancy between market reality and expert opinion. According to Goldman Sachs’s own prime brokerage data, the hedge funds had sold more global stocks in the previous few days than at any other time in their dataset’s 2010 history. It was identified as one of the five most pessimistic readings in 25 years by Bank of America’s Fund Manager Survey. And yet.

Any honest person will tell you that markets are unpredictable, so the mistake went beyond just choosing the wrong course. The quality of the reasoning behind the forecasts was the deeper issue. In mid-2024, Howard Marks, one of the few voices in finance who appears genuinely unconcerned by acknowledging uncertainty, wrote about what he referred to as “the folly of certainty.”

His argument was simple: certainty is not a sign of expertise in fields that are shaped by human psychology, irrational behavior, and randomness, and investing is unquestionably one of those fields. It serves as a warning. It appears that the forecasters who controlled the airwaves in early April 2025 did not read that memo.

What could be referred to as second-level thinking was nearly completely absent from the expert commentary. In his most recent book, Barry Ritholtz uses this term to describe something surprisingly straightforward: the capacity to look past the headline and the obvious response and consider what is already ingrained in prices.

The S&P 500 had already dropped by almost 18% by the first week of April. New one-year lows had been reached by 40% of NYSE-listed stocks. Wall Street‘s rough gauge of fear, the VIX, had reached 50, which has historically been linked to true panic. The S&P 500 has never experienced a negative one-year return after a VIX reading of 50. This is a detail that is often overlooked in the drama. Never once.

With that knowledge, a second-level thinker might have said, “I have no idea what happens next with tariffs or trade policy, but I know that a lot of pain is already priced in, and that makes me more interested in buying than selling.” It wouldn’t have been a compelling television sentence. The narrative momentum of a recession call is absent. However, it would have been correct.

To their credit, Morgan Stanley’s analysts have occasionally displayed this way of thinking in different situations. Genuine institutional rigor is demonstrated by the bank’s Vintage Values framework, which generated a 35.57% return between September 2024 and September 2025. This method is structured, risk-adjusted, and goes far beyond headline forecasts.

In 2025, the average gain for their thematic categories was 38%. With its claim of long-term ad economics and AI-driven re-rating potential, the Meta research is a significant piece of work. Within that building, there is actual intellectual capacity.

This increases rather than decreases the puzzle of the macro forecasting failure. During volatile times, there may be a systematic pull toward consensus doomsaying due to the incentive structures of large sell-side institutions. Being quietly contrarian and correct carries far greater career risk than being loudly wrong with everyone else. At some point, it seems like the job is more about sounding authoritative than it is about being accurate. 2025 made it impossible to overlook the fact that the two things are not the same.

One market strategist likes to say that sentiment follows price momentum by roughly two weeks. By May, the same economists who had put the likelihood of a recession at dangerously high levels were subtly lowering those figures. The VIX had dropped to 18. The tone changed from doomsday to “well, markets have shown resilience,” and from crisis to caution. Examining the discrepancy between the predictions and reality didn’t seem to pique anyone’s interest.

In the end, that is the most bizarre aspect of the entire narrative. It’s not that analysts were incorrect; the truthful ones will tell you that they frequently are. The lack of accountability and the institutional ease with which a string of notable failures is incorporated into the upcoming quarterly forecast are what remain. The analyst remains employed.

The bank retains its customers. The same voices are consistently booked by the television bookers. Outside of Midtown’s glass skyscrapers, the market continues to do what it has always done, which is to humble the certain and sometimes reward those who are uncommon enough to acknowledge they don’t know.