Prominent Wall Street Bear Wilson Sets Bullish Target for U.S. Stocks

(Bloomberg) — Morgan Stanley strategist Michael Wilson, well known for his bearish views on U.S. stocks in recent years, has a downright bullish outlook for 2025.

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The strategist expects the S&P 500 to finish next year around the 6,500 level, up 11% from Friday's close, with gains driven by improving economic growth and further interest rate reductions from the Federal Reserve. He previously had a target of 5,400 for the benchmark index by mid-2025.

U.S. valuations are rich, but that's helped by a better U.S. macro picture, possible future U.S. tariff policy that's more negative for rest-of-world growth, and animal spirits leading to a widening rally, the strategists wrote from Morgan Stanley in a note. . Deregulation under Donald Trump's administration will also benefit U.S. businesses, although the impact of other potential policies is unclear, he said.

After correctly predicting the stock sell-off in 2022, Wilson maintained a bearish outlook through 2023 as markets recovered. He finally relented and raised his target for the S&P 500 earlier this year, and said the benchmark index could even reach 6,100 by the end of 2024.

U.S. stocks have already surged more than 50% since the start of 2023, buoyed by the frenzy surrounding developments in artificial intelligence, a surprisingly resilient economy and interest rate cuts.

We expect this broadening of earnings growth to continue as the Fed cuts rates next year and business cycle indicators continue to improve, Wilson wrote in Morgan Stanley's 2025 Outlook .

Implementation of Trump's economic agenda could further bolster sentiment, although Wilson recommended investors remain nimble in their sector and stock selection given the lack of visibility on the impact of immigration policies , trade, deregulation and public spending.

Post-election uncertainty has also led strategists to maintain a wider-than-normal outcome range for stocks. In the worst case scenario, the S&P would fall 22% to 4,600 points while the most bullish scenario would see the index jump 26% to 7,400 points.

The bank expects the U.S. stock market to continue to outperform the rest of the world, particularly Europe, where Morgan Stanley strategists have downgraded their rating to neutral. The MSCI Europe Index is expected to move range-bound until greater visibility is provided on U.S. policies such as trade tariffs.

The story continues

At Goldman Sachs Group Inc., strategists led by Peter Oppenheimer said today they forecast total global equity returns in dollar terms of 10% through the end of 2025.

Stock valuations have risen and leave little room for further valuation expansion, they wrote in a separate note. We expect index returns to be largely driven by earnings growth.

–With help from Michael Msika.

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