Wall Street investment bank Morgan Stanley (MS) expects the bull run in U.S. stocks to continue in this year’s second half.
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The American stock market is entering the year’s back-end in record territory, and Morgan Stanley expects that to continue for another 12 to 18 months. Mike Wilson, Morgan Stanley’s top equity strategist, says in a note to clients that three factors are likely to power U.S. stocks higher in coming months.
The first is corporate earnings, with analyst forecasts for S&P 500 earnings improving markedly as fears subside about the damage done to corporate profits from tariffs and trade wars. And the positive view of company profits is widening beyond the big tech names such as Nvidia (NVDA) and Meta Platforms (META) to a wider swath of the market.
Wilson also notes that earnings growth is now expected to outperform economic growth, a reversal from what occurred between 2022 and 2024. Tax incentives from U.S. President Donald Trump’s economic stimulus bill are also expected to give corporate America a lift in coming quarters, notes Wilson.
Rate Cuts
The second factor is interest rates. Wilson expects the U.S. Federal Reserve to cut interest rates a total of seven times in 2026 as unemployment becomes more of an issue than inflation. Such a dramatic cut to interest rates will provide a strong tailwind to stocks, says Wilson.
The third factor likely to keep the current rally going is the market’s ability to shrug off major shocks. “The equity market seems to be following the historical playbook around prior geopolitical risk events that we highlighted last week — stability in performance after a few days,” writes Wilson.
Finally, Wilson cites calm in the bond market as another reason for investors to remain constructive on stocks. “With this dynamic taking place, and the 10-year yield staying contained below 4.50%, we believe interest rate risk has been reduced for the time being,” Wilson writes in his note.
Morgan Stanley maintains its target for the S&P 500 index over the next 12 months at 6,500, which is 4% higher than its current level. MS stock has risen 14% this year.
Is MS Stock a Buy?
The stock of Morgan Stanley 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 $133.18 implies 5.49% downside from current levels.
