Morgan Stanley expects a favorable environment for risky investments in 2026. US stocks are likely to benefit particularly.
• Morgan Stanley expects the S&P 500 to rise 14 percent
• Government bonds are likely to rise in the first half of 2026
• When it comes to raw materials, the bank favors gold as well as copper and aluminum
Favorable conditions for US stocks
After a year of 2025 marked by political and macroeconomic uncertainties, Morgan Stanley sees the conditions for 2026 as significantly more positive – especially for risky investments. As shown in the US investment bank’s investment outlook published on November 19, 2025, US stocks are expected to outperform their global counterparts. Morgan Stanley Research predicts that the S&P 500 will rise to 7,800 points within the next twelve months – an increase of 14 percent compared to its previous level.
For comparison: the bank expects only 7 percent growth for the Japanese TOPIX and only 4 percent for the MSCI Europe. Morgan Stanley cites several factors as driving the strong performance of US stocks: a market-friendly mix of fiscal and monetary policy, interest rate cuts by the US Federal Reserve, tax breaks for companies through the “One Big Beautiful Act” and efficiency gains through artificial intelligence. Serena Tang, chief global cross-asset strategist at Morgan Stanley, is quoted in the outlook as saying that fiscal policy, monetary policy and deregulation interacted in a way that rarely occurs outside of a recession.
Mixed outlook for bonds and currencies
Morgan Stanley expects a two-part trend on the bond market. In the first half of 2026, government bonds are likely to benefit and increase from the central banks’ interest rate turnaround. The yield on ten-year US government bonds will fall until the middle of the year before rising slightly above 4 percent again at the end of the year. Also in the Eurozone and Great Britain, the bank expects interest rate curves to be steeper, albeit less pronounced than in the USA.
According to Morgan Stanley, the US dollar could continue to lose value in early 2026 but recover in the second quarter, ending its bear market phase. In the first half of 2025, the US dollar index lost more than 10 percent against other major currencies. European currencies, which were among the G10 winners in 2025, are likely to lose strength as the European Central Bank and the Bank of England continue their interest rate cuts.
AI investments are shaping credit markets
A dominant topic on the credit markets in 2026 is likely to be the financing of AI infrastructure. As Morgan Stanley points out in its outlook, of the estimated $3 trillion in data center investment, less than 20 percent has been spent to date. The expected increase in bond issuance in the technology sector is likely to widen spreads on US investment grade bonds. High-yield bonds, on the other hand, could perform better because they are less affected by the flood of AI-related issues.
Mergers and acquisitions are also likely to boost the credit market: Morgan Stanley expects volume growth of 32 percent in 2025, followed by 20 percent in 2026 and 15 percent in 2027. When it comes to raw materials, the bank favors gold and the industrial metals copper and aluminum over energy. The price of Brent oil is expected to settle at around $60 per barrel, weighed down by weak demand and increasing supply.
D. Maier / editorial team finanzen.net
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