Morgan Stanley's Mike Wilson: Still very constructive on where the S&P 500 ends up for the full year

Summary

Mike Wilson, Morgan Stanley CIO, maintains a bullish S&P 500 year-end target of 8000, seeing a quality rotation as the early-cycle recovery fades. He expects near-term choppiness but views 7000 as a floor and buying opportunity. Semiconductors and hyperscalers have corrected sharply on peak earnings momentum, but the selloff may be nearing its end.

• Wilson remains constructive on S&P 500 with an 8,000 year-end price target.
• He sees the 7,000 level as a strong support and a potential aggressive buying opportunity.
• Market leadership is rotating toward quality: earnings stability, free cash flow, and strong balance sheets.
• The top quintile (top 100) quality stocks in the S&P 500 are beginning to outperform.
• Semiconductors have sold off due to peak earnings revision momentum; the correction may be near its end.
• Hyperscalers' poor free cash flow has weighed on their stocks, but much of that underperformance is now priced in.
• Near-term, the market may chop for another month amid Fed transition uncertainty and geopolitical risks.
• A potential 25bp Fed hike would serve as a one-off insurance move to defend inflation credibility.