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Investing.com -- Morgan Stanley expects a broad capital markets rebound in 2026 to create what it calls “an attractive entry point” across U.S. brokers, asset managers and exchanges.
In a 2026 outlook note, analyst Michael Cyprys told investors that the bank is “leaning into a capital markets recovery,” highlighting rising risk appetite and cyclical tailwinds across the sector.
According to Morgan Stanley, “near-term volatility creates an attractive entry point in key Overweights,” with KKR remaining its top pick. The bank also upgraded Nasdaq and Apollo to Overweight and cut MarketAxess to Equal Weight on expectations of “lower credit volatility.”
The firm’s macro team sees a “risk reboot” taking shape next year, even as GDP growth slows in the near term due to tariffs and immigration policy.
Morgan Stanley forecasts one more 25bp Federal Reserve rate cut in 2025 and “two more in 1H26 before a pause,” followed by a reacceleration in U.S. growth in the second half of 2026, supported by “pro-cyclical policies, AI-driven productivity gains, and healthy balance sheets.”
Morgan Stanley strategists have raised their 12-month S&P 500 target to 7,800.
Alternative asset managers are set to benefit most from the rebound, with Morgan Stanley saying the capital markets recovery should “fuel the private markets flywheel.”
The note cites positive indicators for M&A and IPO activity and long-term under-allocation from private wealth and insurance as powerful structural supports.
Furthermore, the bank favors capital markets beneficiaries as well as commercial real estate recovery stories such as BX and BN.
It also sees a constructive setup for brokers, saying retail engagement and wealth effects should support “NNA acceleration” into 2026. It prefers Charles Schwab and LPL Financial.
On exchanges, Cyprus highlights catalysts ranging from 0DTE options to 24/7 trading. It says innovations could “turbocharge volumes,” favouring CME and MIAX, while upgrading Nasdaq on “cyclical tailwinds” and accelerating organic revenue growth.