Michael Wilson, Wall Street's biggest 'bear' turns 'bull'…"S&P 7800P next year"

Forecast of double-digit market gains for four consecutive years

"Higher U.S. corporate pricing power, AI efficiency, regulatory easing, stable interest rates"

Michael Wilson, Morgan Stanley's strategist who was Wall Street's top bear in 2022 and 2023, has now returned as a strong bull. He cited stronger U.S. corporate pricing power, efficiency from artificial intelligence (AI), tax and regulatory easing, and a stable interest rate environment as the reasons for next year's market strength.

According to Bloomberg on the 17th (local time), Morgan Stanley's Michael Wilson predicted that the S&P 500 index will rise 16% by the end of next year, powered by strong corporate earnings from U.S. companies. Wilson expects the index to trade at about 7,800 points by the end of 2026.

This is the highest among S&P 500 targets tracked by Bloomberg. If it reaches 7,800 points next year, it would mean the S&P 500 records double-digit gains for four consecutive years.

In a memo, Wilson wrote, "We are in the middle of a new bull market and earnings cycle even in many of the index's underperforming areas."

The strategist forecast that S&P 500 companies' earnings per share will increase by 17% and 12% over the next 2 years, respectively. He cited stronger pricing power among U.S. companies, improved efficiency from artificial intelligence (AI), tax and regulatory easing, and stable interest rates as the reasons.

Wilson was one of the few forecasters who remained optimistic even in April when U.S. President Trump announced reciprocal tariffs. As President Trump eased the trade war, the S&P 500 hit record highs.

In this year's investor survey, Michael Wilson was named the second-best portfolio strategist after Michael Kantrovitz of Piper Sandler.

U.S. equities have been hitting record highs as U.S. companies' third-quarter results far exceeded expectations. Despite some doubts about high AI valuations and the risk of the longest government shutdown in U.S. history, confidence in economic growth remains.

The S&P 500 recorded annual gains of more than 20% over the past 2 years and has risen 14% so far in 2025.

However, there are some concerns. For example, Peter Oppenheimer, a strategist at Goldman Sachs Group, expects that due to the high valuations of the U.S. market, U.S. stocks will underperform emerging and other global markets over the next 10 years.

But Wilson also warned of short-term risks if the Federal Reserve's policy is more hawkish than expected. He added that, over the long term, a booming economy could revive inflation.

Guest Reporter Jeong-a Kim kja@hankyung.com