2026 Economic Outlook Moderate Growth Morgan Stanley

Bonisiwe Shabane

-Nov 29, 2025, 1:03 AM

2026 economic outlook moderate growth morgan stanley

At Morgan Stanley, we lead with exceptional ideas. Across all our businesses, we offer keen insight on today's most critical issues. Learn from our industry leaders about how to manage your wealth and help meet your personal financial goals. At Morgan Stanley, we lead with exceptional ideas. Across all our businesses, we offer keen insight on today's most critical issues. From volatility and geopolitics to economic trends and investment outlooks, stay informed on the key developments shaping today's markets.

At Morgan Stanley, we lead with exceptional ideas. Across all our businesses, we offer keen insight on today's most critical issues. According to Reuters, Morgan Stanley expects U.S. stocks to outperform global markets in 2026 and is optimistic about the performance of global equities relative to credit and government bonds, supported by the growth of capital expenditures related to artificial intelligence and... "Driven by micro fundamentals, accelerated AI capital expenditures, and favorable policies, risk assets are well-prepared for a strong performance in 2026," the Wall Street investment bank noted in a series of global economic and... Although the fluctuating tariff policies of the Trump administration have led to ongoing turbulence in global financial markets this year, most trade uncertainties are gradually dissipating as 2026 approaches.

The bank predicts that 2026 will see "moderate" global economic growth alongside deflation, but emphasizes that "uncertainty remains high, and the range of outcomes could be extremely divergent," with "the U.S. being a key variable." Additionally, Morgan Stanley forecasts that the S&P 500 index will reach 7,800 points by the end of 2026, representing about a 16% upside from current levels, primarily driven by robust corporate earnings growth and... Under the influence of the Federal Reserve's dovish policies, U.S. small-cap stocks are expected to outperform large-cap stocks, and cyclical sectors will outperform defensive sectors. The dollar index is expected to drop to 94 in the first half of the year, before rebounding to 99 by the end of 2026.

The bank also predicts that gold prices will reach $4,500 per ounce in 2026. As we edge toward 2026, Morgan Stanley is signaling cautious optimism: moderate global growth paired with easing inflation and strategic AI-driven investments could make next year a quiet but meaningful win for risk assets. With the S&P 500 potentially climbing 14% and global GDP forecast at 3.2%, investors get the chance to leverage structural trends without chasing a speculative boom. Morgan Stanley sees 2026 as a turning point for winning investment strategies where moderate growth meets elevated asset performance. According to the firm’s twin outlooks released in mid‑November, global growth is expected to settle around 3.2% next year, while U.S. equities may leap about 14% in the same period.

On the economic front, the analysts project global GDP growth to moderate to roughly 3.0% in 2025 and slightly grow to 3.2% in 2026, aided by resilient consumption, ongoing capital investment, and continuing disinflation. The bank points out that developed‑market inflation is trending down, giving central banks room to ease policy, which in turn supports growth and risk appetite. The U.S. economy stands as a cornerstone. Morgan Stanley estimates U.S. real GDP growth could slow to 1.8% in 2026 and then rise to 2.0% in 2027.

While Europe is expected to remain sluggish (just over 1% growth in 2026), the U.S. is the principal engine of global upside. One may note that China’s GDP is expected to expand by around 5%. However, much of its growth is domestic and tightly controlled, while the U.S. has deep, liquid capital markets that channel investment globally. Furthermore, the U.S.

economy is roughly $27 trillion, while China is around $18 trillion (nominal). Even a smaller growth rate in the U.S. adds more absolute dollars to global GDP than China’s faster growth. Each year the largest Wall Street banks and global asset managers publish their outlooks for the coming economic cycle. These reports shape how institutional investors position portfolios and how economists think about the year ahead. For 2026, the core themes are clear: steady growth, a cooling labor market, a more accommodative Federal Reserve and continued AI-driven productivity gains.

This roundup summarizes the 2026 U.S. outlooks from twelve of the most influential firms: Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America, U.S. Bank, Wells Fargo, UBS, Barclays, Deutsche Bank, BlackRock, Vanguard and PIMCO. The goal is simple. Cut through the noise and show where the Street agrees, where it disagrees and what it means for the economy and markets. Goldman expects the U.S.

to grow near long-run potential in 2026 with AI-driven productivity supporting output. The labor market cools but avoids recession territory. The firm sees moderate equity upside and stresses quality and AI-linked sectors. For the full Goldman Sachs investment report, click here. The Global Economy in 2026: A Year of Surprises and Strategic Shifts? Serena Tang: Welcome to Thoughts on the Market.

I’m Serena Tang, Chief Global Cross-Asset Strategist at Morgan Stanley. Joining me today is Seth Carpenter, our Global Chief Economist. Over the next two days, we’ll dive into Morgan Stanley’s 2026 outlook. Today, we’re tackling the macroeconomic landscape, and tomorrow, we’ll explore investment strategies across asset classes and markets. It’s Monday, November 17th, 10 a.m. in New York.

Seth, 2025 has been a year of transition. Global growth slowed under the weight of tariffs and policy uncertainty, yet consumer spending and AI-driven investments kept recession fears at bay. Your team has just released its 2026 economic outlook. What’s your take on global growth for the year ahead? Seth Carpenter: Next year, we expect the global economy to continue slowing, much like it did in 2025, settling into a more moderate growth rate. At the same time, inflation should keep drifting downward in most regions.

But here’s where it gets controversial: this seemingly straightforward view masks significant regional disparities and uncertainties. For instance, the U.S. economy is likely to slow further in the near term, particularly in the fourth quarter of this year and early next year. However, once we work through the effects of tariffs and monetary policy, we anticipate a pickup in the second half of 2026. China’s story is quite different. The country remains trapped in a deflationary spiral, pushing growth downward.

We don’t see this changing next year, meaning China will likely miss its 5% growth target. In Europe, fiscal policies are creating a push-and-pull dynamic, and while the ECB believes it’s achieved its inflation goals, growth remains unremarkable—hovering just above 1%. Not terrible, but nothing to celebrate. Our 2026 global economic outlook forecasts slowing inflation and moderate growth, as AI outlays boost capital spending. As the calendar turns toward 2026, Morgan Stanley (NYSE:MS) has released a highly anticipated market outlook that navigates a narrow path between structural optimism and valuation-driven caution. The firm’s Global Investment Committee (GIC) has officially set a year-end 2026 target of 7,500 for the S&P 500, suggesting a roughly 10% upside from current levels.

However, this bullish figure comes with a stern caveat: the bank is advising clients to "temper their exuberance," warning that the easy gains of the post-2023 era may be behind us as the market... The "cautiously bullish" stance reflects a market at a crossroads. While the S&P 500 has enjoyed a robust 2025—trading near the 6,900 level as of December 22, 2025—Morgan Stanley analysts argue that the narrative is shifting from a narrow, tech-led rally to a "rolling... For investors, the message is clear: the bull market remains intact, but the margin for error has significantly narrowed. The roadmap to 7,500 is paved with an aggressive forecast for corporate earnings. Morgan Stanley’s Chief U.S.

Equity Strategist, Mike Wilson, has been a central figure in this pivot, moving from his long-held skepticism to a more constructive, albeit selective, outlook. Wilson has even issued an "out-of-consensus" 12-month target of 7,800, asserting that the market entered a fresh bull cycle in April 2025. This optimism is fueled by a projected 17% growth in earnings per share (EPS) for 2026, outstripping the broader Wall Street consensus of 14%. The firm believes that "positive operating leverage"—where revenue growth outpaces expense growth—will finally manifest as companies move past the "rolling recession" that plagued various sectors in 2024 and early 2025. The timeline leading to this projection has been marked by significant shifts in Federal Reserve policy and fiscal expectations. Throughout 2025, the Fed executed three rate cuts, bringing the target range down to 3.50%–3.75% in response to a cooling labor market, which saw unemployment tick up to 4.6% by late 2025.

This "run it hot" approach by the central bank, combined with the anticipated $129 billion in corporate tax relief from the "One Big Beautiful Act," has provided the liquidity and fiscal tailwinds necessary to... However, the GIC’s warning to "temper exuberance" stems from the fact that forward price-to-earnings (P/E) ratios are currently hovering above 22x, a level that historically limits the potential for further multiple expansion. As the market "broadens out," Morgan Stanley (NYSE:MS) is advising a strategic shift away from the concentrated "Magnificent Seven" leadership that dominated the early 2020s. The firm has upgraded small and mid-cap stocks to an "Overweight" rating, noting that earnings revisions for companies in the Russell 2000 began to outpace their large-cap counterparts in the final quarter of 2025. This represents a significant opportunity for regional players like KeyCorp (NYSE:KEY) and Fifth Third Bancorp (NASDAQ:FITB), which are expected to benefit from a steeper yield curve and a projected 20% surge in M&A activity... At Morgan Stanley, we lead with exceptional ideas.

Across all our businesses, we offer keen insight on today's most critical issues. Learn from our industry leaders about how to manage your wealth and help meet your personal financial goals. At Morgan Stanley, we lead with exceptional ideas. Across all our businesses, we offer keen insight on today's most critical issues. From volatility and geopolitics to economic trends and investment outlooks, stay informed on the key developments shaping today's markets. At Morgan Stanley, we lead with exceptional ideas.

2026 Economic Outlook Moderate Growth Morgan Stanley

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