So Morgan Stanley’s Michael Wilson just did that thing where Wall Street analysts pretend they can see the future. This time, he’s bumped his S&P 500 target from 7,200 to 7,800 by the end of 2026. That’s an 18% jump from where we’re sitting now at around 6,600.
Before you roll your eyes at another “expert prediction,” let’s break down why Wilson thinks the market’s about to keep this party going.
The “New Bull Market” Theory
Wilson’s calling this a fresh bull market that started in late April, claiming the previous one died during that lovely market crash earlier this year. It’s like declaring your relationship officially over after the big fight, then starting fresh with the same person. But hey, if it helps the narrative…
The S&P 500 is already up 13% this year, which marks three straight years of double-digit returns. Not too shabby for an index that’s supposedly “expensive.”
Show Me The Money (Earnings)
Here’s where Wilson gets into the nitty-gritty. He’s betting on corporate earnings to do the heavy lifting:
- 2025: $272 per share (12% increase)
- 2026: $317 per share (17% gain)
- 2027: $356 per share (another 12% bump)
His reasoning? AI efficiency gains, friendly tax policies, and companies finally getting some pricing power back. Basically, the corporate world’s version of having your cake and eating it too.
Small Caps Get Some Love
Wilson’s also bullish on small-cap stocks, which have been the market’s awkward cousin this year. While the S&P 500 partied, the Russell 2000 managed a measly 5.8% gain. Wilson thinks it’s time for the little guys to shine.
He’s particularly excited about financials, industrials, and healthcare. Healthcare especially gets a boost from rate cuts and M&A activity. Biotech, apparently, loves it when the Fed starts cutting rates – who knew?
The Reality Check
Look, predicting where the market will be in two years is like trying to guess what you’ll want for dinner next Tuesday. Wilson admits some areas look “frothy” (Wall Street speak for “maybe a bit bubbly”), but argues many stocks aren’t as expensive as they seem once you factor in growing earnings.
The P/E ratio he’s forecasting? Around 22. Not exactly bargain-basement territory, but not completely insane either.
The Bottom Line
Wilson’s essentially betting that corporate America will keep printing money while the economy stays cooperative. It’s an optimistic take in a world that’s served up plenty of curveballs lately.
Will he be right? Your guess is as good as mine. But if you’re looking for sectors to watch, financials, industrials, and healthcare just got a Wall Street stamp of approval. Just remember – even the smartest analysts are basically throwing darts at a very expensive dartboard.