Investing.com — Morgan Stanley equity strategist Michael Wilson believes the S&P 500 could rally to 7,200 by mid-2026, citing a “rolling recovery” in earnings and supportive macro trends.
“We’re leaning more toward our bull case for the S&P 500 by the middle of next year—7200 (22.5x forward EPS of 319),” Wilson wrote in a note published Monday.
He added that “earnings growth is on solid footing” and pointed to Morgan Stanley’s non-PMI earnings model, which is “pointing to mid-teens EPS growth.”
Wilson described the current cycle as “no ordinary cycle,” noting that the market capitulation seen in April marked “the end of a rolling earnings recession that began in 2022.”
In his view, the current backdrop is supported by several tailwinds, including “positive operating leverage, AI adoption, dollar weakness, cash tax savings from the OBBBA, easy growth comparisons, pent-up demand and a high probability of Fed cuts by 1Q26.”
He argued that “the historically sharp inflection we’re seeing in earnings revisions breadth confirms this process is underway,” and that the probability of achieving the bull case “is going up.”
Among sectors, Wilson reiterated his preference for Industrials, calling it Morgan Stanley’s “top sector pick.”
He highlighted “durable” earnings revisions, stable capacity utilisation, and rising C&I loans, while noting that the bank’s US Multi-Industry analyst prefers names such as Rockwell Automation (NYSE:ROK), Eaton (NYSE:ETN), Trane, and Johnson Controls (NYSE:JCI) as favoured names.
Although Wilson acknowledged risks, including “elevated back-end rates, tariff-related inflation and softening seasonals,” he expects any pullbacks to be “shallow,” and said Morgan Stanley (NYSE:MS) remains a “buyer of dips.”
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