Morgan Stanley strategist Michael Wilson expects the S&P 500’s rally to continue in the second half of the year. This optimism stems from improving earnings revisions and anticipated Federal Reserve rate cuts.

Fundamentals Driving the Rally

• Earnings revision breadth is improving: The current revision breadth has climbed to -5%, a notable increase from April’s low.
• Historical context matters: Similar inflection points in previous years led to substantial rallies.

Monetary Easing on the Horizon

• Forecasts show seven rate cuts by 2026: This is fueling market optimism.
• Valuation impacts: Lower interest rates will increase present valuation of future earnings.

Lower Geopolitical Risks

• Oil prices are down: This helps mitigate inflation concerns.
• Legislative wins: Recent policy changes are easing investor fears.

Actionable Insights & Next Steps

• Stay updated on earnings alerts and track upcoming surprises.
• Monitor Fed decisions closely as they may impact rate expectations.
• Gauge sector rotations to identify strong valuation supports.

In conclusion, the combination of improving earnings and anticipated Federal Reserve actions presents a favorable outlook for the S&P 500 in the latter part of 2025.