Morgan Stanley Sees 8% Gain for S&P 500 This Year Despite ‘Tightrope of Uncertainty’

Wall Street investment bank Morgan Stanley (MS) expects the bull market to continue for a fourth consecutive year in 2026 even as investors navigate a “tightrope” of geopolitical uncertainty.

In a new report called “Will 2026 Be a High-Wire Act for Markets?,” Morgan Stanley’s Global Investment Committee says that it expects the benchmark S&P 500 Index to gain about 8% this year and finish 2026 at the 7,500 level.

Morgan Stanley says the artificial intelligence (AI) capital expenditure boom will continue this year and recession fears in the U.S. are nonexistent, developments that are likely to send equities higher over the next 12 months. Interest rate cuts and earnings-per-share (EPS) growth forecasts of 14% to 16% are other reasons for optimism, says the investment bank.

Geopolitical Risks

Despite a positive overall narrative, Morgan Stanley says that geopolitical risks still loom over markets and that investors are likely to walk a tightrope of uncertainty throughout 2026. In the U.S., a shift toward populist affordability politics heading into the midterm elections this autumn carries risks.

Abroad, geopolitical flashpoints such as Venezuela, Iran, and Greenland add “layers of uncertainty.” Given the heightened uncertainty and likelihood of market volatility, Morgan Stanley recommends that investors diversify and “emphasize quality—in sectors like financials, healthcare, select industrials and materials, aerospace, defense and energy.”

Is MS Stock a Buy?

Morgan Stanley’s stock has a consensus Moderate Buy rating among 14 Wall Street analysts. That rating is based on six Buy and eight Hold recommendations issued in the last three months. The average MS price target of $192.33 implies 5.87% upside from current levels.

Read more analyst ratings on MS stock