Morgan Stanley’s Michael Wilson says the weak U.S. dollar will support U.S. corporate earnings, helping the American stock market to outperform the rest of the world.
At a time when many other Wall Street strategists are calling time on the era of U.S. exceptionalism, Wilson stands out for his view that the U.S. is a better relative bet. He cited less volatile earnings growth and the fact that American companies are deemed to be higher quality as other reasons for the call.
“We remain in a late cycle backdrop where both quality and large-cap relative outperformance should continue,” he wrote in a note on Monday.
Wilson expects the S&P 500 to remain in the 5,000 to 5,500 point range. A more substantial increase would require a tariff deal with China, clear rebound in earnings estimates and the possibility of easier monetary policy from the U.S. Federal Reserve, he wrote.
JPMorgan Chase & Co.’s Mislav Matejka is among those favoring international stocks over U.S. ones. In his latest note, he said the risk-reward is better for non-U.S. stocks, especially if U.S. President Donald Trump continues to backtrack on tariff policy and the chances of a recession remain high.
Matejka is not alone in his cautious outlook for U.S. equities. Societe Generale SA head of asset allocation Alain Bokobza warned that investors will continue slashing their U.S. stocks and dollar exposure if Trump persists with his trade policy.
Last week, Bank of America Corp. strategists advised to sell into U.S. stocks and dollar rallies, saying that the conditions for sustained gains are missing.
Julien Ponthus, Bloomberg News
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