Morgan Stanley upgrades US stocks rating and expects S&P 500 to rise by Q2 of 2026

Morgan Stanley upgraded its rating on US stocks to “overweight”, citing a combination of solid earnings with supportive monetary policy and a weakening dollar.

The Wall Street giant favors US stocks over assets from other regions and forecasts the S&P 500 Index to rise to the 6,500 level by the second quarter of 2026.

Earnings per share are forecast to rise through 2027 due to the pressure on the dollar and falling interest rates.

According to Morgan Stanley analysts, dollar weakness will be a positive catalyst for profits of multinational corporations, and risky and risk-free US assets are more attractive than counterparts in other countries.

By the end of this year, the bank forecasts a slowdown in global real GDP to 2.5% from 3.5% at the end of 2024. Inflation will remain stable, slightly decreasing to 2.1% by the end of 2025 from 2.3% a year earlier.

Overall, Morgan Stanley forecasts generalized economic weakness. The US, eurozone and UK economies are expected to grow by about 1% in 2025, while growth in emerging economies is expected to slow by about one percentage point. China's GDP growth is anticipated to show the sharpest slowdown.