Morgan Stanley has upgraded its outlook for US equities, citing stronger-than-expected corporate earnings and continued economic resilience as key drivers behind its increasingly constructive stance on the market, according to a report by Bloomberg.
The bank now forecasts the S&P 500 will climb to 8,300 over the next 12 months, representing roughly 12% upside from current levels. Its year-end target has also been lifted to 8,000 from the previous 7,800 projection.
The revised outlook follows a first-quarter earnings season that significantly outperformed expectations. Profits among S&P 500 constituents are currently tracking growth of 27%, far exceeding analyst estimates of around 12% heading into reporting season.
Mike Wilson, who leads Morgan Stanley’s equity strategy team, said the durability of earnings growth despite ongoing geopolitical tensions, concerns surrounding private credit markets and disruption linked to artificial intelligence supports the bank’s positive market view.
Wilson maintained a bullish stance during the recent market turbulence sparked by the Iran conflict, particularly on the earnings outlook. Equity markets have since rebounded to record highs, reinforcing that call.
Morgan Stanley also expects market leadership to broaden beyond the dominant mega-cap technology names that powered much of the first-quarter gains. The bank currently favours industrials, financials and consumer discretionary sectors, while noting that major hyperscale technology companies still appear reasonably valued.
In contrast, the firm remains more cautious on European equities. Morgan Stanley strategist Marina Zavolock said regional markets continue to be weighed down by uncertainty surrounding disruption risks in the Strait of Hormuz.
She warned that companies may increasingly pass higher costs on to consumers, potentially pressuring demand and limiting upside for European stocks.
As a result, the bank continues to expect volatile and rangebound trading conditions across European equity markets.
