Morgan Stanley (MS) has turned bullish on U.S. equities.
In a new report, the U.S. investment bank has raised its rating on U.S. stocks to “overweight” and said that the benchmark S&P 500 index could rise 25% from current levels and reach 7,400 in 2025.
That’s a significant upgrade from Morgan Stanley, which as recently as June of this year had forecast that the S&P 500 would be at 5,400 by the end of next year.
The bank’s previous best-case scenario called for the benchmark stock index to hit 6,350 during 2025 before pulling back.
In its report, Morgan Stanley said that a combination of strong fundamentals and positive macroeconomics should sustain the current stock market rally into next year.
The bank said that the multiple on 12-month forward earnings will contract slightly to 21.5 from 22.2 but remain at a premium to the 10-year average.
The analysts at Morgan Stanley led by Chief Investment Officer Mike Wilson said that they expect 13% earnings per share (EPS) growth in 2025 and another 12% gain for 2026.
“We expect the recent broadening in earnings growth to continue in 2025 as the Fed cuts rates into next year and business cycle indicators continue to improve…” reads the report.
Looking outside America, Morgan Stanley is also bullish on Japanese equities moving forward.
The bank also forecasts that the 10-year Treasury yield will fall to 3.55% in 2025 as they expect more Fed rate cuts than the market has priced in currently.
Morgan Stanley also targets Brent crude oil, the international standard, at $66 U.S. a barrel due to supply growth from the OPEC+ cartel.
The stock of Morgan Stanley has risen 43% so far in 2024 and currently trades at $134.06 U.S. per share.
