Morgan Stanley believes that the surge in artificial intelligence spending will drive corporate earnings and propel US stocks to fresh record highs next year.
In a new episode of the bank’s Thoughts on the Market podcast, Morgan Stanley global cross-asset strategist Serena Tang says markets are shifting from macro fear to micro opportunity.
She also notes that the Trump administration’s pro-business approach will drive risk-taking in the stock market.
“We think 2026 will be a strong year for risk assets, as you have an unusually pro-cyclical policy mix that’s supportive of earnings. And that frees up markets to, I think, shift the focus from global macro concerns, which, of course, have dominated this year, to more micro-asset-specific narratives, particularly those related to AI CapEx investment. And I think such a constructive environment really calls for a risk-on tilt.”
Data from Bloomberg shows that Meta, Alphabet, Amazon and Microsoft are primed to deploy $400 billion in AI capital expenditure next year, fueling US corporate earnings.
Tang says the bank’s bullish stance centers firmly on US equities.
“We recommend equities over credit and government bonds. We have a preference for US assets.”
As for the bank’s target for the S&P 500 next year, Tang cites a prediction made by Morgan Stanley executive Mike Wilson.
“As you know, Mike Wilson, our colleague and chief US equity strategist, he has a price target of 7,800 for the S&P 500 index, beating the expected returns from other regional equities by quite a bit. So that’s not going to change.”
As of Tuesday’s close, the S&P 500 is hovering at 6,617, down about 4% from its all-time high of 6,920.
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