Special Encore: 2026 U.S. Outlook: The Bull Market’s Underappreciated Narrative
December 26, 2025
AI Summary
5 min read🎙️ The Voices & The Context
- The Format: This solo monologue by a top market strategist delivers a precise, data-driven preview of 2026 economic and equity forecasts, tying recent policy shifts and market surprises to actionable investment insights in a fast-paced financial podcast format. Analytical and predictive.
- The Format: Solo host discussion.
- The Key Players:
- Mike Wilson: Morgan Stanley's CIO and Chief U.S. Equity Strategist, renowned for his out-of-consensus calls like forecasting a weak start to Trump's second term followed by a strong rebound, making him a go-to voice for institutional investors navigating volatile markets.
🗝️ Key Themes & Topics
The episode unpacks 2026's brighter economic backdrop against 2025's surprises, emphasizing a new bull market, policy-driven growth, and selective equity opportunities. It blends historical context, forward forecasts, and tactical trades for listeners tuning into macro trends.
- Topic 1: 2025 Recap vs. Expectations – Wilson reviews how 2025 defied predictions of slow growth and sticky inflation; unemployment rose but markets surged on AI capex boom, while a "rolling recession" ended in April, marking the start of a subtle bull market amid Trump administration policy sequencing that prioritized short-term pain for long-term gains.
- Topic 2: 2026 Economic Outlook – Global growth acce
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What you'll learn
- 1 (01:09) **2026 U.S. Equity Outlook Overview**
- 2 (01:20) **Recap of 2025 Outlook: Challenging H1, Strong H2**
- 3 (02:05) **Less Economic Slack in 2025 vs. Trump's First Term**
- 4 (02:50) **2026 Policies as Growth-Positive: Run It Hot Thesis**
- 5 (03:07) **End of Rolling Recession: New Bull Market in April 2025**
- 6 (03:40) **Missing Catalyst: Delayed Fed Rate Cuts**
- 7 (04:20) **Fed to Deliver Dovish Policy Amid Labor Weakness**
+ Full timestamped outline available in the app
Show Notes
Original Release Date: November 19, 2025
Our CIO and Chief U.S. Equity Strategist Mike Wilson explains why he continues to hold on to an out-of-consensus view of a growth positive 2026, despite near-term risks.
Read more insights from Morgan Stanley.
----- Transcript -----
Welcome to Thoughts on the Market. I'm Mike Wilson, Morgan Stanley’s CIO and Chief U.S. Equity Strategist.
Today I’ll discuss our outlook for 2026 that we published earlier this week.
It’s Wednesday, Nov 19th at 6:30 am in New York.
So, let’s get after it.
2026 is a continuation of the story we have been telling for the past year.
Looking back to a year ago, our U.S. equity outlook was for a challenging first half, followed by a strong second half. At the time of publication, this was an out of consensus stance. Many expected a strong first half, as President Trump took office for his second term. And then a more challenging second half due to the return of inflation.
We based our differentiated view on the notion that policy sequencing in the new Trump administration would intentionally be growth negative to start. We likened the strategy to a new CEO choosing to ‘kitchen sink’ the results in an effort to clear the decks for a new growth positive strategy. We thought that transition would come around mid-year.
The U.S. economy had much less slack when President Trump took office the second time, compared to the first time he came into office. And this was the main reason we thought it was likely to be sequenced differently. Earnings revisions breadth and other cyclical indicators were also in a phase of deceleration at the end of 2024. In contrast, at the beginning of 2017—when we were out of consensus bullish—earnings revisions breadth and many cyclical gauges were starting to reaccelerate after the manufacturing and commodity downturn of 2015/2016.
Looking back on this year, this cadence of policy sequencing did broadly play out—it just happened faster and more dramatically than we expected. Our views on the policy front still appear to be out of consensus. Many industry watchers are questioning whether policies enacted this year will ultimately lead to better growth going forward, especially for the average stock. From our perspective, the policy choices being made are growth positive for 2026 and are largely in line with our ‘run it hot’ thesis.
There’s another factor embedded in our more constructive take. April marked the end of a rolling recession that began three years prior. The final stages were a recession in government thanks to DOGE, a rate of change trough in expectations around AI CapEx growth and trade policy, and a recession in consumer services that is still ongoing. In short, we believe a new bull market and rolling recover
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