The S&P 500 was up about 1.8% at 5,767.57, as the broad stock market celebrated a huge Monday rally. The “Magnificent Seven” were clearly the ones to start this charge. This surprisingly small group is made up of such tech titans as Apple, Nvidia, Meta Platforms, Amazon, Alphabet, Microsoft, and Tesla. As a result, the Dow Jones Industrial Average shot up by almost 600 points, one of the largest increases in history. At the same time, the Nasdaq Composite jumped more than 2%. Even with these advances, Morgan Stanley’s Chief Investment Officer Mike Wilson urged investors to consider the sustainability of this rally.
Wilson’s macro-focused year-end S&P 500 target of 6,500 is one of the most ambitious on Wall Street. He cautioned that any upward momentum we have created might be ephemeral.
"Whatever rally we're getting now, we think probably end up fading into earnings, into May and June," – Mike Wilson
The recent stock market rally is indeed cause for celebration. Those numbers might sound like good news, except the S&P 500 is still nearly 6% under its all-time peak. Wilson is of the opinion that opportunity for positive profit surprises exists only in a limited aperture within today’s prevailing market backdrop. He continues to look for a dramatic reversal of money back into U.S. stocks. This move continues to be driven by a much weaker dollar and a positive turn in EPS revisions for the “Magnificent Seven.”
Tesla, the electric vehicle maker, drove a big part of Monday’s rally, notching its best daily performance since November. Wilson thinks the times haven’t been too kind to the tech moguls. Yet, he thinks it’s an exciting time for them to be prospering given today’s economic climate.
The Federal Reserve’s positive step of ending the rate cutting cycle has served to help stabilize and improve investor sentiment. Although capital may be flowing back into the U.S., Wilson is still skeptical about where the market is headed in the long run. While he doesn’t discount the chance of hitting new annual lows, he stays upbeat on at least one sector.
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