Andrew Sheets and Mike Wilson from Morgan Stanley provide an economic and market outlook. Sheets reviews 2025, noting slower growth and resilient markets driven by AI, and projects a brighter 2026 with accelerating global growth and easing inflation, particularly in the U.S. Wilson discusses Morgan Stanley's 2026 U.S. equity outlook, which anticipated a challenging first half followed by a strong second half, attributing this to policy sequencing in the new administration and the end of a "rolling recession" in April. He forecasts a new bull market, significant earnings upside, and sets an S&P 500 target of 7,800, favoring financials, industrials, healthcare, consumer discretionary (goods), software over semiconductors, and small caps over large caps.
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