What does Morgan Stanley predict for US stocks and yields?

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Morgan Stanley Foresees Continued Gains in US Stocks and Yields

Morgan Stanley predicts that stock market gains have further to run, with investors currently under-pricing the global economic recovery from the coronavirus pandemic. The investment bank forecasts the S&P 500 index to reach 3,350 points by mid-2021, alongside a projection for benchmark US 10-year Treasury yields to hit 1.3 per cent within the same timeframe.
S&P 500 Index Projection

Morgan Stanley has set a target of 3,350 points for the S&P 500 index by the middle of 2021. This outlook is based on the belief that the market's upward momentum will continue, driven by an underestimated scale of global recovery from the pandemic. The S&P 500 closed at 3,041.31 points on the Friday preceding the note's distribution.
US 10-Year Yield Forecast

The bank anticipates that benchmark US 10-year Treasury yields will rise to 1.3 per cent by mid-2021. This projection suggests an expectation of increasing interest rates or a shift in market sentiment regarding bond prices. Currently, these yields are at approximately 0.6625 per cent.
Investment Recommendations

In line with their market outlook, Morgan Stanley analysts are recommending a strategic shift in investment portfolios. They advise a broad rotation into cyclical and value stocks across global equities. Additionally, they suggest taking long positions in US small caps and financials, as well as the euro and emerging market currencies like the Indonesian rupiah and Indian rupee, while increasing risk in credit portfolios.
Underlying Market Rationale

The core reasoning behind Morgan Stanley's optimistic forecast is the belief that the current economic cycle is more "normal" than investors are appreciating. Despite significant market rallies from March lows, the bank's chief cross-asset strategist, Andrew Sheets, believes that both stocks and credit markets are poised for modest gains and tighter spreads over the next twelve months.

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What does Morgan Stanley predict for US stocks and yields?

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