Mike Wilson, Morgan Stanley's CIO and Chief U.S. Equity Strategist, discusses the firm's 2026 outlook, which continues their previous forecast of a challenging first half followed by a strong second half, contrary to market consensus. He explains that policy sequencing under the new Trump administration was intentionally growth-negative initially, akin to a CEO "kitchen sinking" results to clear the way for new growth strategies. Wilson believes a new bull market and rolling recovery began in April, marking the end of a rolling recession, and anticipates significant upside in earnings over the next year as the recovery broadens. The forecast includes a 12-month S&P 500 target of 7,800, driven by 17% earnings growth, with favored sectors including financials, industrials, healthcare, and an upgrade to consumer discretionary. He also recommends software over semiconductors and small caps over large caps, expecting a more accommodative Fed to support early cycle broadening.
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