Due to the strong U.S. labor market, resilient economy, and signs of loose interest rates, two top Wall Street strategists have become more bullish on U.S. stocks.
Mike Wilson, the chief U.S. stock strategist at the well-known Wall Street bear Morgan Stanley, is now more optimistic about so-called cyclical stocks compared to before. He believes that cyclical stocks, which follow the ups and downs of the economic cycle, will outperform defensive stocks that are considered safer. He pointed out that the strong U.S. non-farm payroll data released last Friday, coupled with expectations of further rate cuts by the Federal Reserve.
In a recent report, Wilson wrote:
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&#34;We still believe that in terms of the stock market's reaction to labor/economic growth data, we are in an environment where 'good is good'. Doubts about the outcome of a soft landing in the bond market are diminishing, which is an important signal for stock investors.&#34;
</blockquote>
Wilson believes that this background is a positive sign for U.S. small-cap stocks, which are expected to benefit from improved corporate activities and sentiment as well as reduced investor selling. Due to the dim short-term risk-return profile, Wilson has reduced his long-term bets on large-cap stocks. Within sectors, Wilson has upgraded the financial sector to overweight and downgraded ratings for healthcare and essential consumer goods.
Another well-known U.S. stock strategist, David Kostin of Goldman Sachs, has raised his expectations for future earnings growth of the S&amp;P 500 index. He expects that a robust macro outlook will drive profit margin growth. Kostin has raised the 12-month target for the S&amp;P 500 index from 6000 points to 6300 points, an increase of 5%. According to Kostin's latest forecast, the S&amp;P index is expected to rise by over 9.5% from last Friday's closing level.
On July 9th this year, Wilson predicted that the S&amp;P was likely to face a 10% pullback. Subsequently, from late July to early August, the U.S. stock market experienced an overall decline, even going through the &#34;Black Monday&#34; on August 5th.
In early September, Wilson warned that U.S. stocks would be very disappointed unless the Federal Reserve cut rates &#34;more than expected&#34;. Subsequently, including senior media figures like journalist Nick Timiraos, known as the &#34;new Fed communication agency,&#34; mentioned the possibility of a significant rate cut by the Fed in September. The September Fed meeting indeed decided to cut rates by 50 basis points. The U.S. stock market in that month broke free from the &#34;curse&#34; of often falling in September, with all three major indices collectively rising.
Nearly two weeks ago on September 24th, Kostin stated that after the election results, U.S. stocks would continue to rise, reiterating that the S&amp;P 500 index would rise to 6000 points in a year. He believed that concerns about a weak labor market trend were exaggerated, and strong corporate earnings would be the main driver of stocks in the coming months.
At that time, Wall Street News mentioned that since releasing the target price forecast for 2024 at the end of last year, Kostin has raised the expected S&amp;P 500 index three times
Including the recent upward revision, Kostin has raised S&amp;P expectations a total of four times since the end of last year

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Morgan Stanley's Mike Wilson believes that cyclical stocks outperform defensive stocks, as the strong non-farm payroll data released last Friday and the expected further rate cuts by the Federal Reserve. Goldman Sachs' David Kostin has raised the S&P's 12-month target price by 5% to 6300 points, equivalent to a more than 9.5% increase from last Friday's closing

- Two top Wall Street strategists have become more optimistic about U.S. stocks due to a strong labor market and signs of economic resilience.  
- Morgan Stanley's Mike Wilson favors cyclical stocks over defensive ones, citing strong non-farm payroll data and anticipated Fed rate cuts, while Goldman Sachs' David Kostin raised his S&P 500 earnings growth forecast, projecting a target of 6,300 points.  
- Both strategists believe that strong corporate earnings will drive stock performance in the coming months, despite previous concerns about market corrections.

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S&P 500

Top Wall Street strategists are more bullish on US stocks, while major short seller Wilson is more bullish on cyclical stocks. Kostin raises S&P target