(Corrects July 21 story to say in paragraph 2 that Morgan Stanley expects S&P 500 to achieve 7,200 factors by center of subsequent 12 months, not this 12 months)
(Reuters) -Morgan Stanley backed its bullish stance on U.S. equities on Monday, citing robust earnings momentum, and stated it was anticipating a modest pullback within the third quarter that might create a chance to purchase the dip.
The Wall Road brokerage is leaning extra in direction of its bull case of the benchmark S&P 500 hitting 7,200 factors by the center of subsequent 12 months, it wrote in a be aware. In Might, the brokerage stated the S&P 500 was anticipated to hit 6,500 within the second quarter of 2026.
“With earnings on stable footing into subsequent 12 months and the Fed nearer to chopping charges, valuations can stay supported round present ranges (~22x) as we take into consideration the 12-month outlook,” Morgan Stanley fairness strategists led by Michael Wilson stated.
Nonetheless, the brokerage stated rising Treasury yields – particularly the 10-year be aware breaching above 4.5% – might enhance charge sensitivity for equities and an underperformance of rate-sensitive shares comparable to small caps.
Morgan Stanley additionally expects tariff-related value pressures to point out up later this 12 months, which might impression firm margins and bump up inflation, resulting in a change in charge minimize expectations by the Federal Reserve.
Lastly, it estimates that seasonal developments could hit shares in from mid-July by way of August.
Nonetheless, the brokerage stated it could purchase the dips because the dangers could possibly be non permanent and solely result in a gentle consolidation.
Jefferies additionally raised its S&P 500 year-end goal to five,600 from its earlier forecast of 5,300, in line with the brokerage’s be aware revealed on Friday.
(Reporting by Shashwat Chauhan in Bengaluru; Modifying by Anil D’Silva)
