Morgan Stanley Chief Investment Officer Mike Wilson delivered a strikingly bullish outlook for the U.S. equity market this week, predicting high teens earnings growth and placing his bets on the consumer goods sector.

The ‘Big Beautiful Bill’ Catalyst

Speaking on CNBC's Squawk Box, Wilson characterized the path forward as “crystal clear,” driven by a stabilizing Federal Reserve and legislative tailwinds that are set to reignite the consumer sector.

Wilson identified consumer goods as his top conviction pick for the year, arguing the sector is primed for a rebound after enduring a “rolling recession.”

He cited a convergence of favorable factors—specifically falling interest rates and fiscal stimulus—that will unlock pent-up demand.

“That's an area where it's going to get a big boost from the ‘Big Beautiful Bill’ from the tax cuts in the first half of this year,” Wilson said.

He noted that the combination of these policy measures and the “attack on affordability” creates a robust environment for consumer stocks, which have yet to fully price in the recovery. Here’s how consumer goods index and certain ETFs tracking the sector have performed.

Earnings Visibility And Fed Support

Contrary to fears of a slowdown, Wilson argues the market's earnings picture is strengthening. “The earnings picture is crystal clear to us,” he stated, forecasting earnings growth in the “high teens” as the rally broadens beyond the tech sector.

A key pillar of this optimism is a shift in Federal Reserve policy. Wilson highlighted that the Fed has begun purchasing assets again to stabilize funding markets—a move he described as a “wild card” that has now been resolved in favor of the bulls.

“The Fed now is addressing these liquidity concerns… proactively,” Wilson noted, adding that this support removes a significant layer of risk for investors.

Risks And The ‘Buy The Dip’ Mentality

While the long-term outlook remains positive, Wilson cautioned that corrections are inevitable in a midterm election year.

He advised investors to expect at least one 10% pullback but urged them to view such dips as buying opportunities rather than signals to exit.

“If we don’t have a 10% correction, it would be unusual,” Wilson admitted. However, he dismissed concerns about an AI bubble or credit collapse, noting it is “too early” in the capital cycle for such risks to materialize.

Instead, he sees a year where “growth is good” and government policy remains supportive, providing a safety net for risk assets.

Benchmark Indices Remain Mixed In 2026 So Far

On a year-to-date basis, the benchmark indices have been trading in a mixed manner so far in the new year. The S&P 500 index was up 0.63% YTD, the Dow Jones by 2.41%. However, the Nasdaq 100 was down by 0.07%.

The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed lower on Thursday. The SPY was down 0.01% at $689.51, while the QQQ declined 0.60% to $620.47, according to Benzinga Pro data.

The futures of Dow Jones, S&P 500, and Nasdaq 100 indices were higher on Friday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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