Morgan Stanley's Wilson: Earnings Growth Accelerating Beyond Tech, US Stock Rally Expected to Broaden
Miles Bennett
Morgan Stanley's Wilson team flags that median EPS growth for S&P 1500 stocks has topped 10%, the best since the post-Covid recovery; broadening earnings outside tech should keep the rally spreading.
What is Wilson's core call?
Median EPS growth across S&P 1500 constituents has crossed 10% — the strongest since the post-pandemic recovery.
This means → it is not just the mega-caps earning more; most companies are accelerating, and the earnings base is widening.
Wilson expects the rally broadening to persist, driven by earnings resilience in the median stock, not just the index heavyweights.
Which sectors are analysts upgrading?
Earnings estimates for consumer discretionary and transportation are still being revised higher.
Both sectors are tightly linked to the economic cycle — rising estimates signal that analysts see underlying fundamentals as solid.
In plain terms = if spending and shipping forecasts are going up, the market is betting the economy is holding together.
How high is the bar this earnings season?
Analysts expect S&P 500 aggregate profit to grow 23% year-on-year — if delivered, that would rank among the strongest quarters on record outside post-recession rebounds.
This means → the expectation itself is the hurdle — any miss could trigger a sell-off.
Major US indices are already near all-time highs, leaving limited room for upside surprises.
What pressure are tech stocks facing?
The market is focused on whether AI demand in semiconductors and the valuations built on it can hold.
Hyperscalers — Microsoft, Amazon, Google and other large AI infrastructure spenders — have underperformed the S&P 500 year-to-date, as investors question the return on massive capex.
In plain terms = the AI story still stands, but "how much of that spending actually comes back as profit" is a growing question mark, and money has stepped back.
What does the equal-weight index outperformance signal?
The equal-weight S&P 500 — a version that dilutes mega-cap influence — has outperformed the cap-weighted index for the first time since 2022.
This reflects a rotation underway: capital is flowing from a handful of heavy-weight names toward a broader set of mid- and small-cap stocks.
RBC Capital Markets strategist Lori Calvasina upgraded tech to overweight in the same period, citing meaningful upward revisions to revenue and earnings estimates plus renewed fund inflows; she acknowledged, however, that "tech valuations are not cheap" — median P/E ratios sit just above long-term averages.
What comes next?
Whether non-tech earnings deliver through the season is the key test for the broadening narrative.
This means → if the median company meets expectations, the rotation thesis holds; if only tech carries the quarter, the broadening story unravels.
In plain terms = the market has drawn a "broad-based rally" blueprint — earnings season is the proof point, and the numbers will decide.
Content is for reference only, not financial advice.