Damo: US stocks will continue to rise with the Federal Reserve's interest rate cuts in line with strong corporate profits

The Zhitong Finance App learned that Michael Wilson, chief US stock strategist at Morgan Stanley, said that in combination with the upcoming interest rate cut by the Federal Reserve and steady corporate profit performance, the US stock market is expected to continue to rise after 4 consecutive months of rise. The strategist, who correctly predicted the rebound of US stocks during the April sell-off, said that the US economy is entering the “early phase of the cycle,” where nominal profits continue to grow while borrowing costs are falling. He added that interest rate sensitive stocks such as small-cap stocks have lagged behind since this year, which indicates that there is room to make up for growth.

Michael Wilson wrote in a report: “We refute the idea that 'interest rate cuts have been fully quantified. ' We respect the upcoming seasonal weak window, but if the market pulls back, we will still buy on dips.”

Since April, the S&P 500 has soared to record highs as markets are betting that the impact of US trade tariffs on the economy will not be as severe as initially feared. Meanwhile, optimism about artificial intelligence is once again driving tech giants' stock prices higher.

The market's focus this week is on key labor market data to find clues about economic growth and the outlook for the Federal Reserve's policies. Current pricing in the swap market indicates that the possibility that the Federal Reserve will cut interest rates later this month is close to 90%.

However, Michael Wilson also warned that the rise in the stock market still faces the risk of seasonal weakness in September and higher-than-expected inflation data. However, he said that if the stock market consolidates in the short term, “it will lay the foundation for a strong end to the end of the year.”

In addition to Michael Wilson, Julian Emanuel, chief stock and quantitative strategist at Evercore ISI, is also optimistic about the outlook for US stocks. Julian Emanuel said that, driven by the artificial intelligence (AI) boom, the US stock market may rise another 20% by the end of 2026. Julian Emanuel said in a report that the S&P 500 index is expected to reach 7,750 points by the end of next year. “The technological revolution will raise stocks, valuation multiples, and society to new heights.” This means that the US stock benchmark index will rise 20% from last Friday's closing, and the index has risen nearly 10% since this year. According to data compiled by Bloomberg, Julian Emanuel's 2026 target for the S&P 500 is the highest on Wall Street to date.

Furthermore, Goldman Sachs's capital flow experts said that after selling US stocks for two consecutive months, institutional investors are still cautious about their current positions. However, they wrote in the report that positions “are still moderate compared to historical levels, and we expect the pullback will be limited in the absence of fundamental shocks.”