Morgan Stanley’s Mike Wilson, one of Wall Street’s most prominent pessimists, has called off his bets on the U.S. stock market this weekend.
S&P500
continued to rise. He even upgraded the sector.
Although Wilson assumes the market will rise only 2%, he raised his 12-month S&P 500 target to 5,400, a 20% increase from his previous forecast of 4,500. His previous forecast suggested the benchmark would fall 15% by December.
The big changes come as the stock market continues to hit record levels this year. The S&P 500 index rose to 5,297.10 on Friday, marking the 23rd record close in 2024.
Wilson expects “solid earnings per share growth” of 8% and 13%, respectively, for S&P 500 companies in 2024 and 2025, and further earnings growth due to margin expansion in both years. he wrote in a memo.
“We like large caps over small caps, we like quality growth and quality cyclical barbells,” he said.
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Wilson upgraded the industrial sector to overweight, writing that he sees “the recent decline as an attractive entry point.”
“We are also encouraged by the fact that the range of earnings revisions widened during the earnings season in all three subgroups: capital goods, commercial and professional services, and transportation.”
“Consistent with our broader market view, we recommend a bias towards large-cap and blue-chip stocks in this sector. “They prefer stories and aerospace and defense,” he wrote.
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Previous ratings for industrial products were not immediately clear.
Wilson isn’t completely bullish yet, but he is beginning to shed his long-term bearish stance.
Other Wall Street strategists are also more bullish. The Deutsche Bank team led by Binky Chadha on Friday set a target for this year’s S&P 500 at 5,500, one of the highest levels in the market. The previous goal was 5,100 to 5,500. Chadha also expects upside from earnings with “adequate leverage,” he wrote.
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The optimism about earnings is not unfounded. In the first quarter, S&P 500 constituent earnings grew a solid 7.1%, compared to his estimate of 3.8%. Nearly 80% of companies reported exceeding earnings expectations, while 16.7% reported below expectations.
But earnings weren’t as strong, with 30% of S&P 500 companies missing expectations, the highest since the pandemic began, according to BMO data.
Nvidia
‘s
Wednesday’s results will be the next focus for the market.Artificial intelligence chip maker’s stock account for 5.1% of the world
SPDR S&P500
It ranks second only to Microsoft and Apple in terms of exchange-traded fund (ETF) weight.
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Nvidia is among the last 10% of S&P 500 stocks whose first-quarter results have not yet been released.
Game Start.
Email Karishma Vanjani at karishma.vanjani@dowjones.com.
