• Morgan Stanley (MS)'s Michael Wilson projects a bullish U.S. stock market into 2026, driven by broadening market leadership and stronger earnings.
  • Consumer Discretionary and Small Caps are expected to outperform, supported by stabilizing prices, better earnings revisions, and lower rates.
  • The Federal Reserve's policy remains a key driver, with Wilson viewing any near-term volatility as a buying opportunity.

Morgan Stanley's chief U.S. equity strategist Michael Wilson has shifted from a cautious stance to a bullish outlook, now forecasting a robust U.S. equity market through 2026. In a recent analysis, Wilson argues that the market is entering an early-cycle "new bull market and earnings cycle," rather than a late-cycle phase, with the S&P 500 poised for significant gains.

According to people familiar with the matter, Wilson's team has raised its 12-month S&P 500 target to about 7,800, implying roughly 16–17% upside from recent levels. This projection is based on forecast 17% earnings growth in 2026 and still-elevated valuations, with the firm expecting market breadth to improve as leadership rotates away from mega-cap tech toward sectors like Financials, Industrials, Healthcare, and Consumer Discretionary. Wilson highlights rising earnings revisions for the Nasdaq 100 and improving forward net-income estimates for the S&P 500 as confirmation that an earnings up-cycle is underway.

Efforts to sustain this bullish trajectory have hit a snag with recent volatility and tech-led selling, but Wilson frames this as a positive development. He suggests that such market pressures could push the Fed toward more rate cuts, creating a "buying opportunity" in any Fed- or liquidity-driven correction. Without a deal on monetary easing, the broader market recovery might stall, but Wilson remains optimistic, noting that the labor market is softening gradually rather than sharply, which he sees as ideal for supporting disinflation without triggering a deep earnings recession.

In a brief statement, Wilson emphasized, "What investors are really focused on is regulatory stability and earnings momentum. The U.S. in this regard has been on a very steady growth trajectory." Attempts to reach out to other analysts for comment were unsuccessful, but industry sources indicate that similar bullish multi-year equity theses are gaining traction, often tied to AI capex and productivity gains.

Wilson's outlook assumes no major regulatory shock or geopolitical event that would derail U.S. growth, with the Fed's rate cuts and liquidity policy central to the bullish case. He compares the current setup to 2018–2019, when a market sell-off preceded renewed easing and a new leg of the bull market. As of the latest data, market reactions have been mixed, with some investors rotating into cyclical sectors in anticipation of broader gains.

Correction: An earlier version of this article misstated the earnings growth forecast; it is 17% for 2026, not 2025.