Morgan Stanley's Wilson remains bullish: Strong earnings support, US stocks still have room for growth in 2026

Despite the risks posed by trade tensions and government shutdowns this year, Wall Street institutions such as Morgan Stanley maintain a bullish stance, believing that strong corporate earnings growth will drive the stock market up by 2026, while uncertainties in interest rate outlook and policy disruptions are merely short-term obstacles.

On November 10, according to media reports, Morgan Stanley strategist Michael Wilson pointed out that there are "clear signs" showing that corporate earnings are recovering, and U.S. companies are enjoying better pricing power. He also noted that earnings forecast revisions have bottomed out, meaning that the number of analysts lowering their forecasts has reached a turning point compared to those raising them.

In his research report, Wilson stated that although the Federal Reserve's policy guidance and the government shutdown have put pressure on recent stock prices, these are temporary obstacles on the road to a robust market driven by earnings growth in 2026. The S&P 500 index has still risen 14% this year and is expected to achieve growth for the third consecutive year.

Meanwhile, this earnings season has significantly exceeded expectations. According to Bloomberg Intelligence data, S&P 500 constituent companies' profits grew nearly 15% in the third quarter. Several investment bank strategists expect technology companies to once again drive most of the U.S. earnings growth next year, with UBS predicting that the S&P 500 will reach a record 7,500 points by the end of 2026, an increase of over 11% from current levels.

Positive Earnings Outlook, Tech Stocks Remain the Engine

Multiple indicators confirm the trend of improving corporate earnings.

An index compiled by Citigroup shows that since mid-October, the number of analysts raising earnings forecasts has outnumbered those lowering them. Market focus has now shifted to NVIDIA, which will announce its earnings next week, as investors look for clues on the trends in artificial intelligence development.

UBS strategists expect technology companies to once again be the main driving force behind U.S. corporate earnings growth next year.

Oppenheimer Asset Management strategist John Stoltzfus stated that it is still too early to "give up" on chip manufacturers and AI prospects.

He believes that the current weakness reflected in major indices appears to be between "trimming" and "fine-tuning," rather than the beginning of a more severe downturn.

Although Federal Reserve Chairman Powell's cautious stance on the interest rate outlook has at times dampened market sentiment, and escalating trade tensions and a prolonged government shutdown have pressured the stock market, Wilson remains relatively optimistic, emphasizing that fundamental factors will ultimately dominate market direction.