Morgan Stanley’s Chief Investment Officer, Mike Wilson, has revised his outlook for the S&P 500. He predicts a significant surge, reaching 6,500 points by year-end, representing a 12% increase from current levels. This prediction is rooted in easing tariff pressures, which could lead to the Federal Reserve potentially reducing interest rates, offering a boost to stocks and other risk assets. Wilson explains, “If the threat of tariffs diminishes, the Federal Reserve can rebalance its dual mandate. While growth prospects appear optimistic, policy balances may lean towards stimulating economic activity rather than curbing inflation.” He highlights that reduced dollar strength and progress in U.S.-China trade negotiations have significantly lowered the risk of recession, leading to elevated corporate earnings expectations. “Based on first-half performance, we expect the second half to exceed expectations, especially considering how poor the first half was.”