Morgan Stanley raised its target for the Standard & Poor's (S&P) 500 index while keeping a bullish outlook on U.S. stocks despite Middle East geopolitical risks and inflation concerns.
According to Bloomberg on the 13th (local time), Morgan Stanley Chief Investment Officer (CIO) and U.S. equity strategy head Mike Wilson said in a report that the year-end S&P 500 forecast was lifted to 8,000 from 7,800.
The 12-month target was set at 8,300. That is about 12% above the recent closing price.
Morgan Stanley viewed positively that U.S. corporations' earnings momentum is proving stronger than expected. In fact, net income for S&P 500 corporations that released first-quarter results this year was tallied to have increased about 27% from a year earlier. That far exceeded the market's initial expectation of an increase in the low 10% range in growth rate.
In the report, CIO Wilson said, "Despite geopolitical tensions, changes in the AI industry, and concerns in the private credit market, corporations' earnings power remains solid," and noted, "This earnings resilience is supporting the outlook for a rising stock market."
In particular, while earnings gains have so far been concentrated in large-cap technology stocks, it projected that the uptrend could spread to other sectors such as financials, industrials, and consumer goods going forward.
It also assessed that valuation pressures on mega-cap technology companies that have surged on the back of AI investment tailwinds are not excessive.
Earlier, Yardeni Research also raised its U.S. stock market outlook recently. Chief investment strategist Ed Yardeni increased his year-end S&P 500 target to 8,250 from 7,700, leaning toward the possibility of a continued bull market.
On the other hand, some warn that the recent rise in New York stocks has entered an overheated phase. Investor Michael Burry, known as the real-life figure behind the film "The Big Short," recently warned of a potential plunge, pointing out in an online post that Nasdaq valuations have become excessively high.