LIVE MARKETS-Morgan Stanley "leaning toward" 7,200 S&P 500 target by mid-2026
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MORGAN STANLEY "LEANING TOWARD" 7,200 S&P 500 TARGET BY MID-2026
Morgan Stanley equity strategist Michael Wilson says the firm is "leaning toward" its bull case target of 7,200 for the S&P 500 .SPX by the middle of next year, citing earnings momentum and other undervalued tailwinds.
The S&P 500 is at 6,302 in early trading on Tuesday, and on Monday it hit its 10th record closing high for the year.
Wilson and his team of strategists write in a note this week that earnings per share revision breadth continues to accelerate, adding to their supportive view on earnings "post the Liberation Day capitulation," referring to U.S. President Donald Trump's tariff announcements that sparked a selloff in equities.
They also note positive operating leverage is returning thanks in part to reduced wage costs and possibly to AI adoption.
"We're also not hearing a significant level of concern from corporates in terms of tariff-related costs impacting margins thus far, though we could hear more about this risk in 3Q," they write.
"With earnings on solid footing into next year and the Fed closer to cutting rates, valuations can remain supported around current levels (~22x) as we think about the 12-month outlook," they add.
For now, MS prefers large-cap and higher-quality stocks over small caps.
Industrials - the S&P 500 top-performing sector this year - remains their top sector pick among cyclicals, while they are still underweight consumer goods.
(Caroline Valetkevitch)
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