Morgan Stanley and JP Morgan support US stocks: Strong corporate earnings outlook, the trend of capital outflows will not last long
Some top strategists on Wall Street believe that despite the challenges facing the U.S. stock market, the trend of capital outflows will not last due to strong economic growth and corporate profit prospects. Michael Wilson of Morgan Stanley expects capital to return to the U.S. stock market and states that the S&P 500 has the best profit growth outlook. Although technology stocks are under pressure, U.S. profit growth still outperforms other regions, so reducing holdings in U.S. stocks is not recommended
The Zhitong Finance APP noted that some top strategists on Wall Street have stated that, given the strong prospects for economic growth and corporate earnings, the U.S. stock market will not remain unpopular for long.
For years, the S&P 500 index has performed well, but by 2025, the index is expected to lag behind its international peers due to the uncertainties surrounding U.S. President Trump's tariffs and immigration policies, as well as high valuations that deter investors. The Chinese AI startup DeepSeek has also raised concerns among investors that the U.S. may lose its pioneering status in artificial intelligence.
Morgan Stanley strategist Michael Wilson stated that he expects capital to return to the U.S. stock market, calling the S&P 500 index the "highest quality index" with the "best earnings growth prospects." Wilson had previously been bearish on the U.S. stock market until mid-2024.
This year, the U.S. stock market has lagged behind international markets.
Wilson wrote in a report, "It is too early to conclude that the trend of pulling out of the U.S. is sustainable."
The stocks of the tech giants, known as the "Seven Giants," have raised the most skepticism among investors, who are concerned that these tech giants, which have driven Wall Street's rebound since the lows at the end of 2022, have now become too expensive. The earnings growth of this group of tech giants is also expected to slow after peaking in 2023. The Nasdaq 100 index, which has a high proportion of tech stocks, fell 2.1% last Friday.
So far this year, the S&P 500 index has only risen about 2%, while the European Stoxx 600 index has increased by 9%, and the Nasdaq Golden Dragon China Index has risen by 18%. In contrast, the Seven Giants have fallen by 1.9%.
J.P. Morgan strategist Mislav Matejka stated that the outlook for large tech stocks is more pessimistic, which indeed poses a "significant obstacle" to the U.S. stock market regaining strong performance.
However, he added that U.S. earnings growth needs to be lower than that of other regions in order to support a thoroughly bearish view.
Matejka wrote in a report, "We do not advocate reducing U.S. stock holdings, as we see that the growth and earnings gap between the U.S. and other countries remains significant, and tariff escalations are also an uncertain factor."
