Morgan Stanley: Fed Rate Cut Expectations to Drive Further Gains in S&P 500

BlockBeats News, June 30th. Mike Wilson, Chief Equity Strategist at Morgan Stanley, pointed out that the stock market rally since April has been primarily driven by fundamentals. Despite the possibility of a short-term consolidation, he remains optimistic about the next 6-12 months as corporate earnings improve and the market warms up to rate cuts. The bank believes three main factors will support the uptrend:

Earnings Improvement: Earnings Per Share (EPS) revision rate has rebounded from -25% in April to -5%, providing further support for the stock indices to move higher;

Rate Cut Expectations: The market has begun to digest the Fed's accommodative policy, with Morgan Stanley expecting a total of seven rate cuts by 2026;

Risk Mitigation: The decline in oil prices and easing of policy/geopolitical risks have significantly reduced concerns about an economic downturn.

Wilson stated that the current environment favors a broad market rally— the market will shift from quality large-cap stocks to a more widespread diffusion, and the interest rate risk is currently manageable.