Morgan Stanley, Goldman expect resilient economy to support stocks
WALL Street strategists are growing optimistic about US stocks, with forecasters at Morgan Stanley and Goldman Sachs Group Inc the latest to suggest resilient economic growth would limit any pullback over the summer.
Morgan Stanley strategist Michael Wilson, who ditched his long-standing bearish call in mid-2024, said a sharp improvement in corporate America's earnings outlook bodes well for the S&P 500 Index into the year-end. He reiterated his 12-month price target of 6,500 points, implying gains of about 8 per cent from current levels.
'We have high conviction that the sharp drawdown in April was the end of a much longer correction that began a year ago with the peak rate of change on earnings revisions breadth,' he wrote in a note. A pick-up in analyst upgrades 'keeps us positive on US equities on a 12-month basis'.
The S&P 500 has rebounded after President Donald Trump paused some of the highest tariffs in a century in April. Recent data signalling a healthy labour market has also fuelled the rally, putting the index about 2 per cent below a February record high. Still, the benchmark has trailed international peers this year, given the trade-related uncertainty.
A slate of strategists including at JPMorgan Chase & Co. and Citigroup Inc have raised their year-end targets for the S&P 500 in recent days, on bets that the worst shock from Trump's trade war was over. For JPMorgan, the upgrade implies no more gains for the gauge through the remainder of 2025, but still represents an about-turn from its previous target that called for a 12 per cent slump.
Over at Goldman Sachs, strategist David Kostin said recent market action suggests investors are pricing an optimistic growth outlook, with economically-sensitive sectors outperforming safer defensive peers.
This raises the risk of near-term equity declines should macro data deteriorate, he said, but 'the market continues to gain confidence as a result of improving soft data and friendly policy news from Washington'.
'If the recovery in soft data is sustained, it should support equity returns even as hard data weakens,' he wrote in a note. BLOOMBERG
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