More Stocks Join the Bull Market

Summary

Mike Wilson, Morgan Stanley CIO and Chief U.S. Equity Strategist, argues that the market broadening trade is gaining steam as semiconductors lose momentum. He sees the S&P 500 dipping to 7,000 near-term before reaching 8,000 by year-end, and recommends using that weakness to add to equities. He is bullish on consumer discretionary goods, transports, and biotech, while favoring hyperscalers over semiconductors in the AI space.

• Broadening trade gains steam as semiconductors, a crowded group, lose momentum.
• S&P 500 may fall to 7,000 in the near term but targets 8,000 by year-end; use weakness to add to equities.
• Consumer discretionary goods benefit from wallet share shift back to goods and improving earnings revisions.
• Transports show improving volumes and pricing, supporting the sector.
• Biotech is an attractive lower-rate beneficiary, with expectations that Fed policy is too hawkish.
• Hyperscalers are likely to outperform semiconductors, as the semi earnings revisions peak and the crowded trade unwinds.
• Softer inflation data should allow the Fed to stay on hold, but the bond market may take time to reprice.