The U.S. stock market will enter 2026 with a “bullish set-up,” supported by broadening participation, strong earnings, and a resilient labor market, according to Morgan Stanley Chief Investment Officer Mike Wilson.
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“As we’ve discussed in detail over the past couple of months, we think the odds of moderately weaker, lagging labor data over the next several months are high, but believe the odds of acutely weaker jobs data (i.e., a non-linear unemployment rate rise) are low,” Wilson said. “This is a bullish set-up for stocks.”
Wilson Bullish on Consumer Discretionary Goods, Small-Cap Stocks
Wilson highlighted consumer discretionary goods and small-cap stocks as contrarian sector picks that have recently shown relative strength, which he believes will continue into next year. He added that strong Black Friday sales and third-quarter top-line numbers support his view.
Ahead of the December 9-10 Federal Open Market Committee (FOMC) meeting, Wilson believes that a hawkish cut is the consensus view. A 25 bps cut is the widely expected outcome, with CME’s FedWatch tool assigning an 89.9% probability to the outcome.
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