US equities are likely to drive the global rally in the coming months on an improving corporate earnings outlook and a weaker dollar, according to cross-asset strategists at Morgan Stanley.
The team led by Serena Tang turned overweight on US stocks and Treasuries, while remaining constructive on corporate credit. Equities will benefit from expected Federal Reserve interest rate cuts and lower odds of a recession, they said.
“TINA – ‘there is no alternative’ – remains a theme for now,” Tang wrote in a note dated May 20. US assets “are – if not simply the best, nor better than all the rest – THE market which will attract the bulk of flows,” she said.
The strategists pushed forward their year-end S&P 500 target of 6,500 points to mid-2026. While that’s 9% higher than current levels, it implies gains for stocks are only likely to go so far. The estimate also matches the average 12-month price target issued by sell-side analysts.
US stocks have rallied in recent weeks, reversing the “Sell America” trade that gripped markets when President Donald Trump embarked on his trade war. The S&P 500 recouped its 2025 declines after Washington announced a temporary tariff truce with Beijing last week. Technology stocks are back in favor, pushing the tech-heavy Nasdaq 100 into so-called overbought territory.
Other Wall Street strategists have also turned more optimistic on stocks as recession fears fade. Goldman Sachs Groups Inc. strategist David Kostin raised his 12-month target for the benchmark index to 6,500 earlier in May, although he warned that pricing was already looking optimistic given lingering uncertainties.
The S&P 500 remains a laggard compared with international peers this year.
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