The backdrop has many on Wall Street, including Morgan Stanley, updating their forecasts. The major investment firm recently released a midyear update that includes economic targets and shatters hopes for more Federal Reserve interest rate cuts this year.

Investing.com -- Morgan Stanley’s Michael Wilson sees the recent selloff in U.S. equities following Moody’s downgrade of the U.S. credit rating as a potential buying opportunity, driven more by interest rate fears than fundamentals. In a note this week, Wilson emphasized that Moody’s action, while impactful, should be viewed in context.

Morgan Stanley sees a more "synchronous" earnings recovery for the U.S. ahead, aided by Fed rate cuts next year, dollar weakness and broader AI gains.