Morgan Stanley’s Mike Wilson Gives Up. He No Longer Sees a Big Stock Market Drop.

Morgan Stanley’s Mike Wilson Gives Up. He No Longer Sees a Big Stock Market Drop.

Morgan Stanley’s Mike Wilson, one of Wall Street’s most prominent pessimists, dropped his bet against the U.S. stock market this weekend, as the


S&P 500

continued to rise. He even upgraded a sector.

Wilson boosted his 12-month S&P 500 target to 5,400, a 20% jump from his last forecast of 4,500, though it assumes the market could rise only 2%. His previous forecast implied that the benchmark would fall 15% by December.

The big change comes as the stock market continues to hit record levels this year. The S&P 500 marched to 5,297.10 on Friday, marking 23 record closes in 2024.

Wilson sees further gains fueled by “robust earnings-per-share growth” of 8% and 13% in 2024 and 2025, respectively, from the S&P 500 companies, along with margin expansion in both years, he wrote in his note.

“We prefer large caps over small caps and a barbell of quality growth and quality cyclicals,” he wrote.

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Wilson upgraded the industrials sector to Overweight, writing that he sees “the recent pullback as an attractive entry point.”

“We also gain confidence from the fact that earnings revisions breadth has risen during earnings season for all three sub groups—Capital Goods, Commercial & Professional Services and Transports,” he said.

“As with our broader market view, we recommend skewing toward large-cap, quality stocks in the sector. Within the space, we also favor growth stories and Aerospace & Defense over Ground Transport and shorter cycle, consumer-levered stocks,” he wrote.

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The previous rating on industrials wasn’t immediately clear.

Wilson still isn’t quite bullish, but he’s dropping the bearish stance he’s had for so long.

Other Wall Street strategists are turning more bullish too. Deutsche Bank’s team led by Binky Chadha adopted 5,500 as their S&P 500 target for the year, one of the highest on the Street, on Friday. Their previous target ranged from 5,100 to 5,500. Chadha also sees upside driven by earnings, which have “plenty of legs,” he wrote.

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The optimism on earnings isn’t unfounded. The first quarter saw solid earnings growth of 7.1% for S&P 500 components versus expectations for 3.8%. Nearly 80% of all companies that have reported bested earnings estimates compared with 16.7% that missed.

Revenue was not quite as robust though, BMO’s data reveal, with 30% of S&P 500 companies missing their projections, the highest since the pandemic began.

Nvidia
’s

earnings report on Wednesday is the next focal point for the market. Shares of the maker of artificial-intelligence chips account for 5.1% of the


SPDR S&P 500

exchange-traded fund, trailing behind only

Microsoft

and

Apple

in weight.

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Nvidia is among the final 10% of S&P 500 components that are yet to report first-quarter results.

Game on.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.

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