- Morgan Stanley’s top equity strategist has ended his bearish view on the stock market.
- Mike Wilson raised his S&P 500 price target by 20% to 5,400 in a note on Sunday.
- Wilson has been bearish for years, correctly predicting a decline in 2022, but intends to fight the rally through 2023.
Wall Street’s top bears have thrown in the towel and turned bullish after the stock market’s big rally.
Morgan Stanley Chief Investment Officer Mike Wilson ended his bearish tone in a note Sunday, raising his 12-month S&P 500 price target by 20% to 5,400.
Wilson previously had a price target of 4,500 for the S&P 500. Wilson’s new bullish forecast could result in a new all-time high for the benchmark index, up about 2% from current levels.
“Our 2024 and 2025 earnings growth forecasts (8% and 13%, respectively) reflect margin expansion in both years as positive operating leverage returns, along with healthy mid-single-digit sales growth. “We’re assuming high growth,” Wilson said.
Wilson’s underlying S&P 500 price target of 5,400 is derived from a price-to-earnings ratio of 19 times estimated earnings per share of $283 for the 12 months ending in June 2026.
Wilson said that in a bullish scenario, the stock market could rise another 20% to $6,350 on the S&P 500 index. Its optimistic scenario sees earnings per share in the range of 11% to 15%, driven by continued fiscal support and cyclical/structural factors and multiple expansions of up to 21x through 2026. driven by stronger growth,” Wilson explained.
Wilson took a bearish stance on U.S. stocks for the first time in 2021, correctly warning that the S&P 500 could fall 20%.
This decline quickly materialized just a few months later in 2022, but since then, the S&P 500 has risen 52% from its October 2022 low, and Wilson expects gains in 2023 and the first few months of this year. I fought the market.
Wilson is currently in the bullish camp on stocks, with JPMorgan’s Dubravko Lakos Bujas and Marko Kolanovic among the few bears left on Wall Street. JPMorgan maintains its year-end price target for the S&P 500 at $4,200, meaning it could fall 21% from current levels.
