Mike Wilson, Morgan Stanley's CIO and Chief U.S. Equity Strategist, presents a positive outlook on large-cap U.S. equities, citing several key indicators: high single-digit earnings per share growth, improving earnings revision breadth, a secondary model forecasting mid-teens EPS growth by the first half of 2026 due to cost efficiencies (particularly from AI adoption), and a weaker dollar. He highlights capital goods and software as strong sectors, driven by infrastructure spending and AI solutions respectively. While acknowledging the risk of long-term interest rates, particularly if the 10-year yield surpasses 4.5%, he maintains an underweight position on consumer discretionary goods and small caps due to various headwinds. Wilson concludes that the rate of change in valuation is more significant than the level itself, supporting his view that current valuations are not overly high.
