Morgan Stanley has turned more bullish on U.S. equities, with chief U.S. equity strategist Mike Wilson lifting his 12-month S&P 500 target to 7,800, up from 7,200 previously. The new target reflects Wilson’s view that a new bull market began in April.
- Wilson argues that earnings growth, improving operating leverage, firmer pricing power, and AI-driven efficiency gains will support profits through 2026, with S&P 500 EPS projected at $272 in 2025, $317 in 2026, and $356 in 2027. He says valuations may compress slightly but should stay elevated given strong profit growth.
- A second key pillar is policy: Wilson expects an accommodative Federal Reserve, with rate cuts and a supportive balance-sheet stance as the administration seeks to “run it hot.” He believes the market is underestimating how dovish the Fed will ultimately be.
On sectors and styles, Morgan Stanley expects leadership to broaden as earnings recover. Wilson upgrades small caps to overweight as earnings revisions turn higher, and lifts consumer discretionary goods to overweight, citing improving revisions versus services. He also reaffirms overweight calls on financials and healthcare, the latter named his preferred “quality growth” exposure
