Morgan Stanley: Potential opportunities in stocks, bonds and other markets in the downturn. S&P 500 is expected to reach or approach 6,000 by the end of the year.

Morgan Stanley Investment Management published its 2024 Global Market Outlook in September, which believes that the key factors in the second half of the year will focus on interest rate levels, inflation trends and the US presidential election. Morgan Stanley Investment Management's Jim Caron believes that there are potential opportunities worth exploring for assets such as stocks, bonds in the whole year. In terms of valuation, from the trend of forward earnings yield, the forward earnings yield of S&P 500 as of May 31, 2024 is 20.5 times, higher than the 19.7 times at the beginning of the year. Both support the S&P 500 index to end the year around 6000 points higher than 5000 points.

The bank said that as of May 2024, the expected earnings of S&P 500 have improved compared with the beginning of the year, indicating that the accumulated earnings in the year is stronger than expected. Unless the economy suddenly slows down, the earnings forecast for 2025 may be higher by the end of the year.

The bank believes that fiscal policy will gradually take the dominant position in the next six months, become the main line of the market, and have a great impact on the US presidential election and tax and expenditure policies in 2025. With the increase of US government spending, debt and deficit, as well as the increasingly serious tariff issues caused by geopolitical issues, fiscal policy may also dominate monetary policy, thus increasing market uncertainty and risk premium. In addition, under the macro background that the global monetary policy is tightening and the dollar valuation is high, and the overall situation of emerging markets is better than developed markets, the bank believes that emerging market bonds have investment value.