Famous big bear switches sides! Morgan Stanley's Chief Strategist Mike Wilson predicts that the S&P 500 index will rise to 6500 points.

A high-profile bearish analyst on Wall Street has begun to join the bullish camp. Morgan Stanley's chief strategist Mike Wilson stated in a report released on Monday that the S&P 500 index could rise to 6,500 points in the next 12 months, which is about 10% higher than the current level of around 5,900 points. Wilson's prediction is one of the optimistic forecasts that have been made on Wall Street since President Trump's re-election earlier this month. Macro Risk Advisors recently stated that the S&P 500 could rise to 7,700 points next year. Senior market commentator Ed Yardeni predicts that the S&P 500 will reach 7,000 points in 2025 and climb to 10,000 points by the end of this decade. However, Wilson's prediction is particularly notable because he has always been known as a market skeptic. In May of this year, he predicted that the S&P 500 would end the year at 4,500 points, which was 15% lower than the market level at the time. Since May, his 12-month target price for the S&P 500 has consistently been at 5,400 points. Wilson stated that his new prediction is based on an expected earnings per share of $303 in 2026 and a P/E ratio of 21.5. He wrote, "We expect earnings growth to continue to expand in 2025 as the Fed may cut rates next year, while business cycle indicators will continue to improve. In our base case, we believe market valuations will only see a slight pullback due to low compressions in high earnings multiples in a loose monetary policy environment." Morgan Stanley expects earnings growth rates of 13% in 2025 and 12% in 2026. While these figures are slightly lower than FactSet analysts' forecast of 13% growth in 2026, they are generally in line with mainstream expectations. FactSet also predicts that EPS in 2026 will reach $309. Despite this, these forecasts are still considered somewhat aggressive as they require earnings growth rates for the next two years to be higher than the 9% in 2024. This goal is expected to be achieved if Trump's economic policies are successfully implemented. The Trump team has pledged to reduce the corporate tax rate from 21% to 15% and continue its landmark tax cuts from 2017, providing tax relief for individuals as well. While tax cuts and other stimulus measures may boost economic growth, there are also risks involved. Drastically cutting tax rates in an already well-functioning economy could reignite inflation risks. Proposed import tariffs could further increase consumer prices, exacerbating inflationary pressures. If inflation gets out of control, the Fed may have to reduce the extent of rate cuts, which could either suppress inflation or hinder economic growth. Despite a gradual decline in bearish sentiment in the market, some analysts remain cautious. Independent strategist David Rosenberg wrote in a report on Monday that it is wise to lower portfolio risks until the policy dust settles. He stated, "It should be clear that the current market rally is not being driven by earnings but by sentiment. If earnings were supporting the market, then the current trading level of the S&P 500 should be about 1,000 points lower." As market sentiment remains bullish, the battle between the bulls and bears continues. The implementation of U.S. economic policies and changes in the global economic environment will have a significant impact on the direction of the S&P 500 index in the future.