Home / Business and Economy / Morgan Stanley Sees S&P 500 Soaring 16% in 2026
Morgan Stanley Sees S&P 500 Soaring 16% in 2026
18 Nov
Summary
- Morgan Stanley forecasts S&P 500 to reach 7,800 by end of 2026
- Bullish on "rolling recovery" and economy running "hot" on inflation
- Recommend investing in small-caps, cyclicals, financials, industrials, healthcare, and consumer discretionary
According to a new report from Morgan Stanley, the S&P 500 is poised to surge 16% to 7,800 by the end of 2026, marking the start of a new bull market and earnings cycle. The bank's chief US equity strategist, Mike Wilson, believes the US economy is in the midst of a "rolling recovery," contrasting with the earlier "rolling recession" thesis.
This recovery is already underway, with 82% of S&P 500 companies beating earnings estimates and 76% topping revenue forecasts in the latest quarter. Additionally, the bank sees the economy entering a new inflationary regime where policymakers are willing to "run it hot" on price growth, at least in the short to medium term.
To capitalize on this early-cycle environment, Morgan Stanley recommends investors focus on small-cap stocks, cyclical sectors, financials, industrials, healthcare, and consumer discretionary. The strategists believe these areas will benefit from factors like compressed cost structures, pent-up demand, rebounding earnings revisions, and a Fed that is tolerant of higher inflation.
