Morgan Stanley predicts rally for U.S. Magnificent Seven stocks

Morgan Stanley's Chief Investment Officer, Mike Wilson, believes that undervalued stocks known as the "Magnificent Seven" may drive a market recovery. He states that recent market drops are not caused by tariffs but by weak earnings revisions and changing economic conditions. On Monday, the S&P 500 rose about 1.8%, closing at 5,767.57. This is roughly 6% below its highest-ever level. The Dow jumped nearly 600 points, and the Nasdaq Composite increased over 2%. The Magnificent Seven, which includes major companies like Apple, Nvidia, and Amazon, contributed significantly to this rally. Wilson noted that the market has seen a "low-quality rally" driven by short-sellers covering their positions. He sees a potential rally continuing toward a target of about 5,900. However, he warns that the gains may be temporary, with the market possibly facing more volatility in the coming months. According to Wilson, the reasons for the market's recent weakness include lower earnings forecasts and a halt in interest rate cuts by the Federal Reserve. He suggests that while the market could rise in the short term, it may face challenges later this year. His forecast for the S&P 500 by year-end is 6,500, indicating a potential gain of nearly 13% from the latest close.