Morgan Stanley has increased its year‑end target for the S&P 500 from 7,800 to 8,000. Compared with the index’s Tuesday close at 7,400, the revised target implies roughly 8 percent upside.
Why the more positive view?
The firm says its optimism is driven more by expected corporate profit growth than by an expansion of valuation multiples. Morgan Stanley projects that S&P 500 companies’ earnings per share (EPS) will rise by about 23 percent in 2026 versus the prior year. The bank points to two principal drivers of that growth:
- efficiency gains from wider adoption of artificial intelligence,
- and stronger pricing power.
Specific projections and longer‑term targets
Morgan Stanley’s EPS forecasts for the S&P 500 are $339 for 2026, $380 for 2027 and $429 for 2028. The bank also set a mid‑2027 index target of 8,300.
Earnings season and recent market performance
So far the quarterly reporting season has shown strength: according to LSEG I/B/E/S data, as of May 8, 440 S&P 500 companies had reported and 83.2 percent beat analyst expectations. The index also posted its largest monthly percentage gain in April since November 2020.
Morgan Stanley expects the earnings environment to remain supportive over the next 12 months.
Risks and resilience
The bank identified inflation as the largest downside risk that could undermine the bullish case. It also cited geopolitical tensions, concerns in the private credit market and industry disruption from AI as risks. Nonetheless, Morgan Stanley noted that corporate results have so far held up reasonably well despite these pressures.
Europe and broader market context
Morgan Stanley is not alone in upgrading outlooks: earlier in the month both HSBC and RBC raised their S&P 500 forecasts. In a separate analysis, Morgan Stanley also raised its mid‑2027 target for the MSCI Europe index from 2,600 to 2,700.
In summary, Morgan Stanley’s more positive stance on the U.S. equity market is grounded in expected profit gains and AI‑driven efficiency improvements, while inflation and geopolitical risks remain the main potential headwinds.
