Prominent Wall Street bear Wilson sets bullish US stock targets

On By Littum

(Bloomberg) — Morgan Stanley strategist Michael Wilson, 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 end next year around the 6,500 level, up 11% from Friday’s close, with gains driven by improved economic growth and further rate cuts by the Federal Reserve. He previously had a target of 5,400 for the benchmark by mid-2025.

“US valuations are rich, but this is helped by better US macro, a potential future US tariff policy is more negative for growth in the rest of the world, and animal spirits leading the rally to widen,” wrote Morgan Stanley strategists in a note. Deregulation under Donald Trump’s administration will also benefit American businesses, although the impact of other potential policies is unclear, he said.

After correctly predicting the stock selloff in 2022, Wilson had a bearish outlook through 2023 as markets rallied. He finally relented and increased his target for the S&P 500 earlier this year, saying the benchmark could even reach 6,100 by the end of 2024.

U.S. stocks are already up more than 50% since the start of 2023, lifted by a frenzy surrounding the development of artificial intelligence, a surprisingly robust economy and interest rate cuts.

“We expect this expansion in earnings growth to continue as the Fed cuts interest rates into next year and economic indicators continue to improve,” Wilson wrote in Morgan Stanley’s 2025 outlook.

The implementation of Trump’s economic agenda could further support sentiment, although Wilson recommended that investors remain nimble in their sector and stock selection, given the lack of visibility on the impact of policies on immigration, trade, deregulation and government spending.

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

The bank expects the US stock market to continue to outperform the rest of the world, especially Europe, where Morgan Stanley’s strategists lowered their rating to neutral. The MSCI Europe index is trading in range until more visibility is given on US policies such as trade tariffs.

Over at Goldman Sachs Group Inc. Strategists led by Peter Oppenheimer said today they expect a total global equity return in dollar terms of 10% through the end of 2025.