Morgan Stanley’s chief U.S. equity strategist Michael Wilson sees the S&P 500 finding support near 5,500, even as a mix of tariff risks, fiscal headwinds, and earnings pressures keeps market volatility elevated. While the index has struggled to break above 6,100—a resistance level identified last year—the downside appears capped around 5,500 for the first half of the year.
“Our work on the tariff risk to earnings and fiscal headwinds suggest that the low end of the first half range is ~5,500,” Wilson wrote. He added, “Our year-end 2025 base case price target remains 6,500, though the path is likely to be volatile as the market continues to contemplate these growth risks for the time being.”
Key Factors at Play
Tariff and Fiscal Uncertainty:Persistent uncertainty over U.S. trade policies and fiscal measures continues to weigh on investor sentiment, keeping volatility high. With ongoing discussions about tariffs and potential fiscal adjustments, market participants remain cautious.
Improving Economic Indicators:The 10-year Treasury yield has declined by about 50 basis points since mid-January—a move historically correlated with an improving economic surprise index. Additionally, the U.S. dollar has weakened by 6% since January, easing pressure on multinational corporations.
Seasonal Trends:Recent seasonal trends point to improving earnings revisions and market performance through March. This dynamic could help stabilize equities near the lower end of the current trading range, making price action around 5,500 an attractive entry point for investors willing to tolerate ongoing volatility.
Valuation and Future Outlook
Despite the short-term challenges, Wilson remains cautiously optimistic about the long-term prospects of the U.S. equity market. However, he cautions that market conditions will remain challenging until fiscal and monetary policies adjust to create a more constructive backdrop. His view is that while the near-term path may be bumpy, the long-term target of 6,500 remains achievable.
For a more in-depth analysis of market valuations and target price assessments, investors can explore Financial Modeling Prep’s Price Target Summary API, which offers detailed insights into analyst forecasts and price targets. Additionally, the Advanced DCF API can provide a comprehensive view of valuation metrics, helping to assess whether the current market levels offer an attractive entry point.
As the market continues to grapple with these uncertainties, Wilson’s insights suggest that a support level near 5,500 could provide a crucial safety net. Investors should remain vigilant and leverage data-driven tools to navigate the evolving market landscape.
