The S&P 500 is on track for its 15th record close of 2025, with futures climbing Monday as investors welcome tariff deals once feared to hurt growth.
Stocks primed for more highs as earnings stay strong and valuations hold
Morgan Stanley’s Mike Wilson — long cautious — is now leaning S&P 500 bullish. In a fresh note, he projects the index at 7,200 within a year, anchored on $319 EPS and a 22.5x forward P/E. His call hinges on stronger-than-expected earnings momentum, aided by:
- AI-driven productivity gains and dollar weakness
- Tax relief from the Trump-era “One Big Beautiful Bill Act”
- Pent-up demand across multiple sectors
- Simpler year-over-year comparisons after years of “rolling earnings recessions”
Wilson also expects Fed rate cuts in early 2026 to provide a valuation tailwind — historically, falling rates and rising earnings have expanded multiples 90% of the time.
Industrials remain his top pick despite recent outperformance, with names like Rockwell Automation, Eaton, Trane Technologies, and Johnson Controls set to benefit from infrastructure and tech spending.
Risks? Higher long-term yields, tariff-related inflation, and seasonal market softness. Still, Wilson views any pullbacks as buy-the-dip opportunities heading into 2026.