The US stock market is firmly recovering after its April low. Key headwinds from earlier this year, including import tariffs and worries about slowing AI investment, are now easing. With these concerns fading, Morgan Stanley predicts further gains for the S&P 500.
In April, analysts were slashing S&P 500 earnings-per-share forecasts at a record pace, with earnings revision breadth hitting -25%. But the situation has improved significantly since then, with the figure now at just -5%. According to Morgan Stanley experts, further improvement in this metric could become a major market catalyst, especially as it approaches positive territory.
The bank projects the S&P 500 will close the year at 6,500, about 5% above current record levels. Morgan Stanley analysts believe a weaker US dollar and the tax relief bill proposed by Donald Trump will continue to boost earnings projections and drive the index higher.