A Morgan Stanley executive believes that a pair of catalysts will send the S&P 500 to new all-time highs this year.
In a new interview, Morgan Stanley CIO and chief equity strategist Mike Wilson lays out what he sees as the key forces that could push the S&P 500 toward 7,800 by year-end.
He first points to uncertainty around the AI capital spending cycle and its broader economic impact.
Wilson says the market is currently wrestling with questions about whether heavy AI investment could disrupt the labor market and other parts of the economy, creating hesitation among investors.
“I think what’s going to break us out ultimately are two things. Number one, there is some uncertainty around the AI CapEx cycle and the disruption that perhaps it could cause in the labor market and other areas. So I think we’re in one of those testing periods now. We heard about that this week. We think that ultimately it’s a little bit premature to kind of throw a cold blanket on the AI cycle. It’s just getting going from our standpoint.”
Wilson’s second catalyst centers on leadership at the Federal Reserve.
He notes that markets often “test” a new Fed chair when they step into the role, and Kevin Warsh’s nomination could create short-term turbulence before clarity emerges.
“And then secondarily, I think we have a new Fed chair nominee with Kevin Warsh. And the market always tests the new Fed chair, whoever it is, when they come into power or office. And so first we have to go through the confirmation hearings, and then we’ve got to learn a little bit more about what he really intends to do. So that could lead to the market kind of struggling for another month or two. And then ultimately, we think once he takes office, we think that’ll be another catalyst for why the market can have a really good second half.”
Despite the near-term chop, Wilson reaffirms his firm’s year-end target of 7,800 for the S&P 500, noting that once AI uncertainty and Fed transition risks clear, the second half of the year could look materially stronger than the first.
At time of publishing, the S&P 500 is hovering at $6,881.
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