US Equity Strategy: Weekly Warm-up: Thoughts from the Road

Research evidence excerpt

US Equity Strategy: Weekly Warm-up: Thoughts from the Road

Idea

May 18, 2026 04:01 AM GMT

Morgan Stanley & Co. LLCMUS Equity Strategy | North America Michael J Wilson

Equity Strategist

Weekly Warm-up: Thoughts M.Wilson@morganstanley.comAndrew B Pauker +1 212 761-2532

Andrew.Pauker@morganstanley.com +1 212 761-1330

from the Road Michelle M. Weaver, CFA

Michelle.M.Weaver@morganstanley.com +1 212 296-5254

We have high conviction in our earnings recovery/broadening Diane Ding, Ph.D.

thesis, and accelerating EPS revisions breadth supports our view. QuantitativeQian.Ding@morganstanley.comStrategist +1 212 761-6758

Despite the resilient earnings data across sectors, many Nicholas Lentini, CFA

investors remain hesitant to add cyclical exposure outside of EquityNick.Lentini@morganstanley.comStrategist +1 212 761-5863

Semis. Rates/liquidity remain a real near-term risk.

• Last Wednesday, We Published Our Mid-Year Outlook...We raised our next

twelve month (mid 2027) S&P 500 price target to 8,300 driven by strong

earnings—16% annualized EPS growth through our forecast horizon (2x the

long-term median). Under the surface, we prefer Industrials, the

hyperscalers, Financials, and Discretionary Goods. Our year-end 2026 price

target moved up from 7,800 to 8,000. Our outlook builds on three themes

we have emphasized since last year: running the economy/earnings cycle hot,

public to private rebalancing, and a broadening of earnings and performance.

Bottom line, this is an earnings story, not a multiple expansion one.

• Feedback on Our Outlook and Other Topics of Discussion…Enthusiasm

around AI remains high, particularly for Semis and Memory. The limited

hesitancy around Semis we did sense stemmed from crowded positioning as

opposed to fundamental variables.