Morgan Stanley predicts stock market recovery with S & P 500 target at 6,500

In the United States, on May 22, 2025, Morgan Stanley's chief U.S. equity strategist Michael Wilson shared insights on the stock market, anticipating that the first half of the year would be challenging but expressed confidence in improved performance in the latter half. The firm maintained its 12-month S & P 500 target of 6,500 despite turbulent market conditions driven by recent tariffs. Wilson noted that the decisions regarding tariffs had impacted stocks significantly, leading to a capitulatory price action that indicates the likely low point for stocks, assuming the economy does not face a deep recession. Moreover, Wilson acknowledged the potential hurdles for the market, particularly the rise in long-term interest rates which could be pressing for investors, evidenced by the 30-year Treasury bond yield surpassing 5.14%. He pointed out the ongoing legislative discussions surrounding a tax bill that could augment the federal deficit, contributing to the complexities of the economic landscape. However, there is optimism that investors will eventually look past these immediate challenges, especially with anticipated tax breaks and deregulation measures that could serve as market stimulants. Wilson emphasized that these factors could support a rebound in the stock market. As for interest rates, Wilson projected a more accommodative stance from the central bank, expecting it to implement significant cuts in 2026, which would further bolster equity valuations. In light of these developments, Wilson articulated a tactical range for the S & P 500 in the first half of 2025, predicting it could fluctuate between 5,500 and 6,100 before moving toward the 12-month target of 6,500. This target remains the highest among analysts surveyed by CNBC, who generally forecast the index to end the year significantly lower at approximately 5,946. In addition, Wilson's bullish scenario includes a target of 7,200, suggesting more than a 23% rise from current levels, while his bearish perspective anticipates a drop to 4,900 should a recession occur. With a plethora of challenges ahead, Wilson remains optimistic that the fundamental outlook for the stock market can still allow for a meaningful recovery, backed by supportive monetary policy and encouraging regulatory changes.