Morgan Stanley "S&P 500, Even if it falls now, 8,000 dollars possible by year-end"

▲ U.S. stock market, bull market/AI-generated image

A bullish outlook has emerged that the S&P 500 could reach 8,000 by the end of the year, even if it falls to 7,000.

Mike Wilson, Chief Investment Officer at Morgan Stanley, stated in an interview with CNBC on July 28 (local time) that the U.S. economy has entered the next phase of sequential recovery. He diagnosed that the upward trend, which had spread to cyclical stocks, is now shifting to a rotation into blue-chip stocks. He assessed that the pace of upward revisions to earnings forecasts for semiconductor companies has already peaked.

Wilson focused on the reason why technology companies' stock prices are falling despite good earnings. While ultra-large cloud companies showed solid performance, their ability to generate free cash flow significantly deteriorated. He explained that the market is lowering high corporate valuations, reflecting a slowdown in growth next year. He also analyzed that the correction in semiconductor and data storage-related stocks has largely progressed.

Investment criteria have shifted from sectors to the fundamental strength of individual companies. Wilson presented the quality of earnings, financial structure, and free cash flow as key criteria. He also emphasized the importance of earnings stability and predictability. The 100 stocks in the top 20% according to these criteria have already begun to outperform the market.

Federal Reserve (Fed) policy and war uncertainties are expected to increase short-term volatility. Wilson believes the market could continue a directionless trend for about a month. However, the S&P 500 has not fallen even 3% from its high. He assessed this as a sign that the fundamental conditions of the U.S. economy are robust.

Wilson said, "The 7,000 level of the S&P 500 will be maintained." He stated that if the index falls to that level, he would present an even more aggressive bullish outlook. He predicted that even if the Fed raises the benchmark interest rate by 0.25 percentage points, it would not lead to continuous increases. He evaluated the interest rate hike as an insurance-like measure to show a commitment to tackling inflation. He maintained the forecast that the S&P 500 could reach 8,000 by year-end, even if it first touches 7,000.

[Article Summary]

-Morgan Stanley analyzed that the leadership in the U.S. stock market is shifting from cyclical stocks to blue-chip stocks with solid earnings and cash flow.

-While the correction in semiconductor and data storage-related stocks has largely progressed, volatility could continue for about a month.

-Even if the S&P 500 falls to 7,000, Morgan Stanley maintains a bullish outlook that it could reach 8,000 by year-end.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*