Morgan Stanley Predicts US Stocks to Reach All-Time High by Mid-2026
According to Morgan Stanley analysts, US stocks are expected to hit a significant all-time high by the middle of next year. The brokerage firm predicts that the S&P 500 may experience a decline in the third quarter of this year but ultimately reach 7,200 points by mid-2026, marking a more than 13% increase from its current level.
Market Momentum and Catalysts
Morgan Stanley’s chief investment officer, Mike Wilson, attributes this bullish market momentum to strong earnings and anticipated Fed rate cuts. Wilson believes that with earnings projected to remain solid into the next year and the possibility of rate cuts by the Federal Reserve, valuations can be supported at current levels (~22x) as they look towards the 12-month outlook.
Potential Challenges
Despite the positive outlook, Morgan Stanley cautions that rising Treasury yields, especially if the 10-year note surpasses 4.5%, could lead to underperformance in certain stocks, such as small-cap equities that are more sensitive to interest rates. Additionally, the brokerage firm foresees an increase in costs and inflation later in the year due to President Trump’s tariffs, which may impact profit margins for companies.
Temporary Market Fluctuations
Morgan Stanley also anticipates a temporary dip in the stock market from mid-July to August, attributing it to seasonal trends. However, the firm suggests that these declines and consolidations are likely buying opportunities and that any setbacks are expected to be short-lived.
Current Market Status
As of the latest closing, the S&P 500 is trading at 6,358 points, with the potential to surge to new highs in the coming months based on Morgan Stanley’s projections.
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