tl;dr
Morgan Stanley analysts predict the S&P 500 will reach an all-time high of 7,200 points by mid-2026, a more than 13% increase from current levels. Chief investment officer Mike Wilson cites strong earnings momentum and expected Federal Reserve rate cuts as key drivers, with valuations remaining arou...
Morgan Stanley analysts are forecasting a significant milestone for US stocks, predicting that the S&P 500 will reach an all-time high of 7,200 points by mid-2026. This projection represents a more than 13% increase from its current level, despite a potential decline in the third quarter of this year.
Mike Wilson, Morgan Stanley’s chief investment officer, attributes this bullish outlook to strong earnings momentum and anticipated Federal Reserve rate cuts. He explains that with earnings remaining solid and the Fed approaching rate reductions, valuations are expected to stay around the current multiple of approximately 22 times earnings over the next 12 months.
However, the firm cautions that rising Treasury yields, especially if the 10-year note surpasses 4.5%, could negatively affect certain segments of the market, such as small-cap stocks which are more interest-rate sensitive. Additionally, Morgan Stanley warns that increased costs and inflation pressures related to tariffs introduced by President Trump may squeeze corporate profit margins later this year.
Seasonal trends could also cause a temporary dip in the market between mid-July and August, but the brokerage suggests that such declines in the third quarter should be viewed as buying opportunities rather than signals of a prolonged downturn.
As of the most recent market close, the S&P 500 was trading at 6,358 points, setting the stage for the potential upside forecasted by Morgan Stanley’s analysts.