Special Encore: 2026 U.S. Outlook: The Bull Market’s Underappreciated Narrative

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.