Reward 300 Tiger-coinsMorgan Stanley has just released its 2026 global strategy, and the message is clear: risk assets are set to lead. Supported by AI capital expenditure, a rare alignment of fiscal, monetary, and deregulation policies, and resilient U.S. economic growth, 2026 could be a strong year for investors who know where to focus.
Morgan Stanley expects strong performance for U.S. equities next year, with a year-end target of 7,800 for the S&P 500. They believe the U.S. recession is over, and that policy support and strong corporate earnings will continue.
Here’s a breakdown of their 10 key predictions:
1. Risk Assets Overall Poised to Shine
Equities are expected to outperform credit and government bonds.
U.S. stocks take the lead, with AI investment and supportive policies driving growth.
2. US Equities Lead the Pack
Benefiting from the “policy triumvirate” (fiscal, monetary, deregulation) and strong earnings growth.
Japan is a secondary pick, while Europe and EM face structural headwinds, except for Brazil and India.
Watch Out: A sudden drop in AI capex or risky financing could pressure U.S. equities.
3. Emerging Market Fixed Income Stays Attractive
Strong returns in H1, with consolidation in H2.
BB credit favored; CEEMEA and LatAm outperform Asia.
Upside: Stronger-than-expected growth in China could boost EM bonds and equities beyond forecasts.
4. Securitized Products Benefit from Deregulation
U.S. and European policy eases attract investors.
Short-term securitized credit, BBB- and agency MBS favored over IG.
Housing activity remains range-bound.
5. AI and Micro Drivers Take Center Stage
Data center and AI capex are still early-stage; $1.5 trillion financing gap remains.
Credit markets play a key role in enabling AI investment, creating differentiated performance across assets.
Risk: AI investment cycle ending early could hit both credit and equities.
6. Commodities: Metals Outperform Energy
Oil stable around $60/bbl; gold preferred.
Copper and aluminum face supply challenges; soybeans bullish.
7. G10 Rates: Duration Overweight in H1
Expect a front-loaded rally as the Fed cuts 50bp, with 10-year USTs reaching 3.75% mid-year before ending at 4.05%.
Europe, U.K., and Japan see milder rate movements.
Risk: Fed policy surprises or rising inflation expectations could hurt IG credit.
8. G10 FX – A Choppy Year Ahead
DXY dips to 94, then rebounds to 99; risk currencies like AUD and SEK gain early.
EUR and GBP lose steam due to divergent policies; USD/JPY could hit 140.
9. Corporate Credit Activity Rises
More capex and M&A; HY expected to outperform IG, financials > cyclicals.
CDX/iTraxx exposure preferred over cash.
Risk: An abrupt AI slowdown may reduce IG issuance but could trigger systemic concerns.
10. Policy Triumvirate Rarely in Sync
U.S. fiscal (OBBBA), monetary (Fed cuts), and deregulation policies align to support risk assets.
Globally, ECB and China easing + EU retail-focused initiatives add fuel.
Watch Out: Trade policies, tariffs, and Fed uncertainties remain key risks.
Let’s Discuss
How do you view Morgan Stanley’s 2026 predictions—optimistic or too bullish?
Which of the ten forecasts do you think is most likely to come true?
Which one do you think could go completely wrong?
You’re also welcome to share your own predictions in the comments, just like this user:
Prediction 1: Meta will cut capital expenditures and see a stock rebound
Prediction 2: The stock market will rise 10% in 2026
Share your thoughts for a chance to win Tiger Coins!
Comments
The forecast I find most convincing is U.S. equity outperformance, supported by earnings momentum and policy tailwinds. The part I’m less confident about is the assumption that AI spending will keep rising smoothly — any slowdown in data-center financing or capex could hit both credit and equities at the same time.
My own 2026 call: AI capex stays high but becomes more selective, the S&P 500 likely posts mid-single-digit gains, and Japan quietly surprises on the upside thanks to reforms and steady BOJ support.
@TigerStars @Tiger_comments
The prediction likely to come true is AI capital expenditure driving growth. This is already happening as tech companies are heavily investing in data centers, cloud infrastructure and advanced chips, thus creating an engine for economic & earnings growth. This trend is likely to continue in 2026 & beyond.
However the prediction of a rare alignment of monetary & fiscal policies could go completely wrong. Political considerations, domestic economic pressures and divergent inflation trends across countries, could lead to divergent policies. This could create volatility and uncertainty in global markets.
Instead of taking these predictions as gospel truth, I would view it as a data point for my own research.
@Tiger_comments @Tiger_SG @TigerStars @TigerClub @CaptainTiger
Check them in the history - “community distribution“
Predication 2: Stock market crash in 2027.( 1987, 1997,2007,2017)
The forecast most likely to come true is the continued investment and productivity gains related to AI.
The forecast that could be wrong is of sustained, moderate global economic growth and gradual disinflation - with Trump around, we can guarantee this won't happen easily.