Morgan Stanley's Chief Investment Officer Mike Wilson is flagging a risk to the stock market that he says is more significant than the Iran conflict.
In a new interview, Wilson warned that rising bond volatility is his biggest concern, as it could reduce market liquidity and pressure equity valuations.
Wilson says a spike in bond market turbulence would be a major headwind for stock multiples, even more so than the level of interest rates. He specifically highlighted that breaking above the 4.50% yield on the 10-year Treasury note could trigger this dynamic. The yield currently sits at 4.39%.
Despite these risks, Wilson acknowledged that the current rally-which pushed the S&P 500 to an all-time high in April-is supported by a broadening base of corporate earnings growth. According to Wilson, the median stock in the Russell 3000 index is now seeing earnings grow nearly 14% year-over-year, a trend he believes remains underappreciated.