Catenaa, Wednesday, May 21, 2025- Morgan Stanley has upgraded US equities to ‘Overweight’, citing resilient earnings, supportive monetary policy, and a weakening dollar as reasons.
In its Mid-Year Global Strategy Outlook released on Tuesday, the investment banker projects the S&P 500 to reach 6,500 by the second quarter of 2026.
The S&P 500 has recovered its losses so far in the year with a 1% gain, as the market went through turbulent times with tariffs and economic uncertainties.
EPS is forecasted to grow steadily through 2027, supported by a pressured dollar and a backdrop of falling interest rates, with valuations expected to remain elevated.
“We prefer US to non-US equities as we anticipate earnings revisions to trough in the near term and USD weakness to be a positive catalyst for multinational earnings,” Morgan Stanley said.
“US risky and risk-free assets are attractive versus the Rest of World (RoW) against a backdrop of a slowing but still expanding global economy despite policy uncertainty, along with deregulation and more rate cuts than priced in the markets,” the report said.
Outside the US, Morgan Stanley is more cautious as it maintains an Equal Weight rating on European and Japanese equities and an Underweight rating on emerging markets (EM).
For Europe and Asia, excluding India, Morgan Stanley sees margin pressures ahead due to stronger local currencies and greater exposure to tariff-sensitive sectors. “Currency strength and an equity market sector skew to tariffs” are expected to weigh on non-US earnings.
