Morgan Stanley's 2026 Bull Market Forecasts

Optimistic Expectations from Morgan Stanley

The US-based investment bank Morgan Stanley has updated its bull market predictions for 2026, indicating that the upward trend in global stock markets may continue. However, the expected returns during this period are anticipated to be more limited compared to previous years.

Economic Fundamentals and Company Earnings

The published report states that the US economy is maintaining its strong stance and the solid appearance of company earnings is laying the groundwork for the transition into the fifth year of the bull market. Additionally, it is emphasized that current positive expectations have significantly reflected in prices, and policy-related uncertainties are among the factors that could weaken any potential upward momentum.

Strong Close of 2025

It has been observed that financial markets completed the year 2025 with strong performance, particularly with the S&P 500 Index reaching historic peaks with an increase of over 16% as of December 12. This rise occurred despite concerns regarding immigration policies and tariffs implemented at the beginning of the year. Following the tariff shock experienced in previous periods, referred to as "Day of Liberation," the effects of these risks on the markets have largely diminished.

Low Recession Risk and Profit Growth Expectations

The Morgan Stanley Global Investment Committee has noted that the likelihood of economic contraction remains at very low levels, suggesting that company profits may show double-digit increases. It is anticipated that in 2026, the S&P 500 Index could rise over 10% to reach the level of 7,500 points.

Investor Recommendations

The report emphasizes that investors should be more selective while maintaining their positions in the current bull market. It highlights the importance of prioritizing portfolio diversification and risk management. Additionally, the view that the Fed will lower its policy rate from 3.5–3.75% to 3% and that investments in artificial intelligence will support profitability is expected to have a significant impact on valuations. However, investors are cautioned that factors such as tariffs and rising health insurance premiums may put pressure on company profit margins.