Morgan Stanley raised its forecast for the Standard & Poor's 500 Index, saying earnings growth at Big Tech firms will spread across all sectors, as U.S. stocks remain resilient despite Middle East risks.
Bloomberg reported on November 13 (local time) that Morgan Stanley's market strategy team, led by Chief U.S. Equity Strategist and Chief Investment Officer Mike Wilson, set a 12-month target for the S&P 500 at 8,300 in a report released that day. Given the index closed at 7,400.96 the previous day, the target implies a 12.15% gain over the next year. Morgan Stanley also raised its year-end target for the S&P 500 to 8,000 from 7,800, suggesting 8.09% upside through the end of the year.
"Resilience in corporate earnings supports our view, despite geopolitical risks, private credit concerns, and disruptive innovation from artificial intelligence (AI)," Wilson said. "While most of the earnings growth in the first quarter was concentrated in a handful of Big Tech names, we expect it to broaden across other sectors within this year."
According to Bloomberg, first-quarter net profit at S&P 500 companies that have reported earnings so far rose 27% from a year earlier. That is more than double the roughly 12% initially forecast by Wall Street analysts.
Morgan Stanley is not the only investment bank predicting further S&P 500 gains this year. Ed Yardeni, chief investment strategist at Yardeni Research, raised his year-end S&P 500 target to 8,250 from 7,700 in an investor note on November 10. HSBC also lifted its year-end S&P 500 target to 7,650 from 7,500.
In contrast, Michael Burry, head of Scion Asset Management and the short seller famously portrayed in the film "The Big Short," struck a bearish tone. In a post on the newsletter platform Substack on November 8, Burry said, "The market isn't moving up and down based on employment reports or consumer sentiment readings. It's going up simply because it has been going up." He added, "It feels like we've reached the final month of the 1999-2000 bubble." Paul Tudor Jones, founder of Tudor Investment and a heavyweight in the U.S. hedge fund industry, also told CNBC on November 7 that the current rally could continue for one to two years before suffering a sharp decline.
