The US stock market is poised for significant growth as signs indicate the beginning of a new cycle, despite the impressive gains of the past three years. Andrew Sheets, the global head of fixed income research at Morgan Stanley, shared insights on this promising outlook during a recent episode of the bank’s “Thoughts on the Market” podcast. He emphasized that the core perspective remains—this market cycle may still thrive before reaching its peak.
Morgan Stanley’s predictions are among the most optimistic on Wall Street, positing that the S&P 500 could rise by 13% by 2026. This optimistic forecast is attributed to anticipated robust earnings growth and a continued “rolling recovery” in the economy. This concept refers to a situation where economic downturns affect various sectors at different times, rather than a broad, simultaneous recession.
Sheets outlined three key indicators suggesting that both earnings and economic expansion may outpace investor expectations:
-
Copper Prices Surging: Copper, often seen as an economic bellwether due to its correlation with industrial and manufacturing activity, has experienced a sharp rise, up approximately 44% over the past year—the highest increase since the Great Financial Crisis. The surge has largely been fueled by supply and demand imbalances, alongside increased expectations for copper’s usage in data centers.
-
Rallying Korean Stocks: In 2025, Korean stocks significantly outperformed the broader market, exemplifying positive prospects for global economic growth. The Korea Composite Stock Price Index soared 75%, greatly exceeding the S&P 500’s 17% increase. Sheets noted that stocks in Korea are considered highly cyclical, serving as a proxy for global economic optimism. Notably, smaller-cap stocks in Korea, which are more sensitive to economic changes, have overshadowed their larger-cap counterparts in performance.
-
Thriving Financial Stocks: Financial stocks across both the US and European markets have shown strong performance—a conducive factor for economic growth. In the US, the financial sector ranked among the best-performing areas, with S&P 500 financial stocks achieving a 14% gain over the last year, as reported by State Street Investment Management.
Sheets stated that these diverse signals from various assets across regions point toward a more favorable outlook for global economic activity. He reiterated that while any single indicator could be misleading, a convergence of multiple indicators warrants serious consideration.
The prevailing sentiment on Wall Street anticipates another year of robust stock performance, driven by expected catalysts such as interest rate cuts, strong corporate earnings, and solid economic growth in the US. Among major financial institutions, Morgan Stanley, RBC, and Deutsche Bank predict that the S&P 500 will achieve at least a 10% increase in the upcoming year, outpacing its historical average.
