Morgan Stanley 2026 Outlook: Moderate rise of the global economy alongside deflation, uncertainty remains high, but US stocks will still outperform global markets.

On November 17, according to Reuters, Morgan Stanley expects U.S. stocks to outperform global markets in 2026 and is optimistic about the performance of global equities relative to credit bonds and government bonds, with its support logic stemming from the growth in artificial intelligence-related capital expenditures and an improving policy environment. “With the joint promotion of micro fundamentals, accelerated AI capital spending, and favourable policies, risk assets are ready for strong performance in 2026,” the Wall Street investment bank noted in a series of global economic and strategic outlook reports released on Monday. Despite the volatility in global financial markets this year due to the Trump administration's fluctuating tariff policies, most trade uncertainties are gradually dissipating as 2026 approaches. The bank predicts a “moderate” global economic growth alongside deflation in 2026 but emphasizes that “uncertainty remains high, and outcome ranges may be extremely divergent,” with the “U.S. becoming a key variable.” Furthermore, Morgan Stanley forecasts the S&P 500 index will reach 7800 points by the end of 2026, representing about a 16% upside from current levels, primarily driven by robust corporate profit growth and AI-driven efficiency improvements. Under the influence of the Fed's dovish policies, U.S. small-cap stocks are expected to outperform large-cap stocks, while cyclical zones will outperform defensive zones. The dollar index is expected to fall to 94 in the first half of the year, then rebound to 99 by the end of 2026. The bank also predicts that gold prices will reach 4500 dollars/ounce in 2026.