Morgan Stanley 2026 Outlook: Policy Environment Changes and Rising AI Investment Shift Market Focus Back to U.S. Stocks

Morgan Stanley (Morgan Stanley) stated in the 2026 Market Outlook report that after experiencing policy and macroeconomic uncertainties for most of 2025, the global investment environment is gradually shifting toward a more favorable state. The report believes that, with rare alignment in monetary policy, fiscal policy, and regulatory direction, coupled with the continued expansion of AI investments, market focus is beginning to shift from macro risks back to the performance and narratives of various assets. Against this backdrop, Morgan Stanley predicts that 2026 will be a year when risk assets regain dominance, with the U.S. market being the most prominent.

2026 Benefiting from the AI Wave, Focus on Related Investment Concept Stocks

Morgan Stanley pointed out that entering 2026, the market environment has significantly improved compared to the previous year. As global inflation cools and economic growth gradually approaches sustainable levels, companies and the overall economy may benefit from productivity gains driven by AI.

The report also notes that the simultaneous strengthening of fiscal policy, monetary policy, and de-regulation measures is uncommon, typically occurring during recessions. However, this time it is happening amid an economic expansion, allowing the market to shift attention from macro risks to assets and industries themselves, especially those related to AI investments.

2026 Stock Market Forecast: U.S. Stocks to Continue Leading

In the stock market, Morgan Stanley indicated that the U.S. stock market is expected to continue leading other major markets globally. It also forecasts that the S&P 500 index could rise by about 14% over the next 12 months, significantly outperforming Japan and European stock markets.

Morgan Stanley believes that profit and cash flow growth for U.S. companies will benefit from several factors, including a market-friendly policy mix, the Fed( expectations of rate cuts, corporate tax reductions totaling approximately $129 billion between 2026 and 2027, as well as operational leverage improvements, pricing power recovery, and efficiency gains driven by AI.

In contrast, European stocks face limited momentum due to weak economic growth and structural challenges, while Chinese stocks still face headwinds from slow re-inflation progress. The Japanese market, supported by fiscal and regulatory reforms and domestic capital inflows, has a relatively positive outlook.

2026 Forex Market Forecast: The U.S. Dollar Will Be Volatile

Regarding the currency market, Morgan Stanley predicts that the U.S. dollar may exhibit a “weakening first, then oscillating” pattern in 2026. The dollar is expected to remain relatively weak in the first half of 2026, but with changes in interest rate differentials and risk premiums, it may rebound around the second quarter, signaling the end of this dollar bearish cycle.

The report also mentions that European currencies performed relatively strongly in 2025, but with the European Central Bank and Bank of England initiating rate cuts, they may weaken in 2026.

2026 Bond Market Forecast: Optimism for the First Half of the Year

In the fixed income market, Morgan Stanley states that as central banks shift their focus from inflation suppression to policy normalization, government bonds may experience a rebound in the first half of 2026.

For example, in the U.S., the report expects the 10-year U.S. Treasury yield to decline before mid-2026, then rebound by the end of the year to slightly above 4%, as markets adjust. The European and UK yield curves may also steepen, but with smaller changes compared to the U.S.

2026 Credit Market Performance: AI Financing Demand as a Key Variable

Morgan Stanley points out that the core theme of the 2026 credit market will revolve around the massive financing needs of the technology industry and AI infrastructure. The report estimates that capital expenditures related to data centers could reach $3 trillion in the future, but current actual investments account for less than 20%.

In this context, debt issuance by the tech industry is expected to increase significantly, potentially widening investment-grade bond spreads. Conversely, high-yield bonds, less affected by the AI financing boom, may perform relatively well.

Additionally, Morgan Stanley also notes that the credit market will continue to support M&A activity in 2026, with deal sizes expected to grow over the coming years.

2026 Commodity Market Forecast: Favor Metals but Cautious on Energy

In commodities, Morgan Stanley expects gold to remain strong in 2026, supported by physical demand and a rate-cutting environment.

Among base metals, copper and aluminum are considered relatively favorable due to supply constraints. On the energy front, Morgan Stanley forecasts Brent crude oil) prices to fluctuate around $60 per barrel, with weak demand and increased supply exerting pressure, though geopolitical and logistical factors may provide some support.

In agricultural products, soybean and corn prices may face upward pressure due to weather conditions and tightening credit conditions in Brazil.

(BlackRock 2026 Outlook: AI Wave Drives Economic Growth, Inflation and Leverage Risks Rise Simultaneously)

This article Morgan Stanley 2026 Outlook: Policy Environment Changes Plus AI Investment Heating Up, Market Focus Returns to U.S. Stocks was first published on Chain News ABMedia.