Mike Wilson, a prominent Wall Street strategist known for his bearish views on U.S. equities in recent years, has now adopted an outright bullish outlook for 2025. Wilson expects the S&P 500 to end next year around the 6,500 level, up 11% from Friday’s close. Wilson attributes his optimistic forecast to improving economic growth and further Federal Reserve interest-rate cuts.
He previously had a target of 5,400 for the benchmark in mid-2025. “US valuations are rich, but this is helped by better macro conditions in the US, potential future US tariff policy being more negative for the rest-of-world growth, and animal spirits leading to the rally broadening out,” Wilson and his team wrote in a note. Wilson also believes that deregulation under the administration of Donald Trump will benefit U.S. corporations, although the impact of other potential policies remains unclear.
After correctly predicting the stock selloff in 2022, Wilson maintained a bearish outlook through 2023 as markets rallied.
Wilson’s strong S&P forecast
Earlier this year, he finally boosted his target for the S&P 500, suggesting the benchmark could even reach 6,100 by the end of 2024.
U.S. stocks have already surged over 50% since the start of 2023, driven by a frenzy surrounding artificial intelligence developments, a surprisingly resilient economy, and interest-rate cuts. “We expect this broadening in earnings growth to continue as the Fed cuts rates into next year and business cycle indicators improve,” Wilson wrote in Morgan Stanley’s 2025 outlook. However, Wilson recommended that investors remain nimble in their sector and stock selection, given the lack of visibility on the impact of policies on immigration, trade, deregulation, and government spending.
Post-election uncertainty has led the strategists to maintain a wider-than-normal range of outcomes for stocks. In their worst-case scenario, the S&P would drop 22% to 4,600 points, while the most bullish case would see the index surge 26% to 7,400 points. Morgan Stanley expects the U.S. stock market to continue to outperform the rest of the world, particularly Europe, where the bank’s strategists lowered their rating to neutral.
The MSCI Europe index is seen trading in a range until more visibility is provided on U.S. policies such as trade tariffs.
