Jefferies raises S&P 500 forecast to 5,600 while Morgan Stanley signals seasonal dip is buyable
Morgan Stanley said the S&P 500 could reach 7,200 by mid-year, leaning further into its bull case as strong earnings and favourable rate dynamics support equity valuations.
BNN Bloomberg reported that strategists led by Michael Wilson said in a Monday note that earnings are solid heading into next year and the Fed appears closer to cutting rates.
As a result, they wrote that “valuations can remain supported around current levels (~22x) as we think about the 12-month outlook.”
The firm noted a modest pullback could occur in the third quarter but identified it as a potential opportunity to buy the dip, calling the risks temporary and suggesting any downturn would lead only to mild consolidation.
As reported by both BNN Bloomberg, Morgan Stanley expects seasonal headwinds from mid-July through August.
However, it maintained its buying stance despite the anticipated short-term weakness.
The brokerage also highlighted several macroeconomic risks.
It warned that if the 10-year US Treasury yield rises above 4.5 percent, equities could become more rate-sensitive.
This would likely cause underperformance among rate-sensitive stocks, particularly small caps.
Morgan Stanley further anticipates tariff-related cost pressures to emerge later this year, potentially squeezing company margins and pushing inflation higher.
These effects could influence the Federal Reserve’s outlook on rate cuts.
Meanwhile, Jefferies revised its year-end forecast for the S&P 500 to 5,600, up from a previous projection of 5,300, as per a note the brokerage published Friday.
