Michael Wilson, a Morgan Stanley strategist known for his bearish stance on the U.S. stock market, has adopted an optimistic view for 2025. He forecasts that the S&P 500 will reach around 6,500 points by the end of next year, which represents an 11% increase from its recent closing value. This boost is expected to be driven by improved economic growth and further rate cuts by the Federal Reserve. Wilson had previously set a mid-2025 target for the index at 5,400 points.
Wilson noted in a report that despite high valuations, factors such as an improved U.S. macroeconomic environment and potential future U.S. policies could enhance valuations. He also mentioned that deregulation efforts initiated under Donald Trump's administration would benefit American businesses, though the impacts of other potential policies remain unclear.
Having accurately predicted the stock market downturn in 2022, Wilson was bearish for 2023 but eventually shifted his outlook earlier this year by raising the S&P 500 target. He even suggested that the index could potentially reach 6,100 points by the end of 2024. Since the beginning of 2023, the U.S. stock market has surged over 50%, fueled by enthusiasm for artificial intelligence, unexpected economic resilience, and interest rate cuts.
Wilson anticipates that profit growth will continue as the Federal Reserve lowers rates and business cycle indicators improve. He suggests that Donald Trump’s economic agenda could further support market sentiment. However, he advises investors to remain flexible in their industry and stock selections due to the uncertain impacts of policies on immigration, trade, deregulation, and government spending.
Uncertainty following the election has led strategists to maintain a wider-than-normal expected range for the stock market. In a pessimistic scenario, the S&P 500 could fall 22% to 4,600 points, while in an optimistic scenario, it could rise 26% to 7,400 points.
