Morgan Stanley Predicts U S Stocks To Outperform In 2026 Raises S P

Bonisiwe Shabane

-Dec 2, 2025, 11:39 PM

morgan stanley predicts u s stocks to outperform in 2026 raises s p

Morgan Stanley expects U.S. stocks to outperform global peers in 2026. The investment bank prefers global equities over credit and government bonds, citing rising spending on artificial intelligence and a supportive policy environment. “Risk assets are set for a strong 2026, driven by solid fundamentals, accelerating AI investment, and a favorable policy backdrop,” Morgan Stanley said in a series of economic and strategic outlook reports published on... Global markets have been volatile this year, partly due to U.S. tariff policies under President Donald Trump.

However, most trade-related uncertainties are expected to ease heading into 2026. The firm forecasts moderate global economic growth and falling inflation, though it cautioned that uncertainty remains high. Morgan Stanley raised its S&P 500 year-end target to 7,800 for 2026, implying a 16% increase from current levels. The bank expects earnings growth and AI-driven efficiency gains to support this rise. U.S. small-cap stocks are projected to outperform large caps, and cyclical sectors may lead over defensive sectors, supported by the Federal Reserve’s dovish stance.

The brokerage also expects the U.S. dollar index to decline to 94 in the first half of 2026 before recovering to 99 by year-end. 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. Please use a PC Browser to access Register-Tadawul UPDATE 1-Morgan Stanley sees US outperforming global stocks in 2026, raises S&P 500 target

Risk assets are primed for a strong 2026, says Morgan Stanley Prefers global equities vs credit and government bonds Brokerage expects US to outperform vs global peers Every time Joe publishes a story, you’ll get an alert straight to your inbox! By clicking “Sign up”, you agree to receive emails from Business Insider. In addition, you accept Insider’s Terms of Service and Privacy Policy.

It's December 1, and we're firmly enmeshed in the most exciting part of any given year. No, I'm not referring to the holiday season, even if your local radio stations have all flipped over to Christmas formatting. I'm talking about stock forecast season, when the top strategists on Wall Street unveil their S&P 500 targets for the year ahead. The Street's heaviest hitters have been on it, with a handful publishing their 2026 outlooks before Thanksgiving, giving market enthusiasts everywhere something to chew on over the holiday weekend. The S&P 500 began November on a volatile note, mirroring its performance in the previous months. Amid growing concerns over an AI bubble and stretched valuations, Morgan Stanley MS still expects U.S.

equities to outperform global peers next year and has lifted its 2026 year-end outlook for the broad market index. According to Reuters, MS favors global stocks over credit and government bonds, bolstered by accelerating AI-related capital spending and supportive policy conditions. The firm expects global financial markets to enter 2026 on a more stable footing, with most trade-related uncertainties having faded. As quoted in the Reuters article, Morgan Stanley projects the S&P 500 to climb to 7,800 by year-end 2026, marking an increase of about 18% from current levels, supported by strong earnings growth and... The firm’s optimistic outlook follows a similar upgrade from UBS. According to UBS forecasts, as quoted by Yahoo Finance, the S&P 500 is expected to reach 7,500 by the end of next year, supported by strong corporate earnings and continued strength in the resilient...

Morgan Stanley also anticipates U.S. small-cap stocks to outperform large caps, aided by the Fed rate cuts. Additionally, a Bank of America survey showed that U.S. small and mid-sized businesses expect a more robust 2026. The past month’s mild stock market dip hasn’t dissuaded strategists at Morgan Stanley from raising their S&P 500 forecast for next year. Mike Wilson, the financial giant’s chief investment officer, now thinks the S&P 500 will finish 2026 at 7,800 amid a “new bull market.”

With the leading index trading at 6,702.82 at time of writing, that would represent an increase of more than 16% over the next 13 months. Wilson says in a new interview with Bloomberg Television that the Federal Reserve needs to cut rates for that forecast to materialize. He also says it’s dependent on “the earnings cycle broadening out.” Wilson argues that the Fed’s balance sheet needs to expand to support the growth that he predicts will materialize next year.

Morgan Stanley Predicts U S Stocks To Outperform In 2026 Raises S P

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