Morgan Stanley expects the S&P 500 (SPX) to rise to 7,500 in 2026, although it warns that investors should “temper their exuberance” for the new year.
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The firm highlights several overlooked bearish factors, such as rising healthcare costs and inflation risks from tariffs, economic stimulus, and a dovish Fed. “If the U.S. presidential administration issues tariff-related bonus checks to voters ahead of midterm elections, it could stimulate the economy and unleash new price pressures, even as the Fed tries to manage inflation,” wrote Lisa Shalett, Morgan Stanley Wealth Management CIO.
Morgan Stanley Urges Diversification and Risk Management
Morgan Stanley’s Global Investment Committee advocates for an actively managed portfolio centered on diversification and risk management instead of investing in the “expensive and highly concentrated” S&P 500. Diversification could come in the form of “real” assets, such as real estate, commodities, and infrastructure.
At the same time, Morgan Stanley advised investors to stay invested instead of trying to time the market. Optimism on Wall Street is running high heading into 2026, with the average price target implying upside of 11%.
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