Two of Wall Street's top strategists have become more optimistic about US stocks because of the strong US labor market, economic resilience, and signs of easing interest rates.

A well-known Wall Street bear — Mike Wilson, chief US stock strategist at Morgan Stanley, is more optimistic about so-called cyclical stocks than before. He believes that cyclical stocks that follow the rise and fall of the economic cycle will perform better than safer defensive stocks. He pointed out that the US September announced last FridayNon-farm payrolls dataStrong, and the Federal Reserve is expected to cut interest rates further.

Wilson's recent report reads:

“We still believe that as far as the stock market responds to labor/economic growth data, we are in a '(data) good is good (signs)' environment. Bond market pairsoft landingDoubts about the results are dwindling, which is an important sign for stock investors.”

Wilson believes that this background bodes well for US small-cap stocks. Such stocks are expected to benefit from improved corporate activity and sentiment and investors from reducing their holdings. Wilson lowered his long-term bet on large-cap stocks because risk and return were weak in the short term. Among the sectors, Wilson raised the financial sector to an increase in holdings and downgraded the rating of medical care and essential consumer goods.

Another well-known US stock strategist, David Kostin of Goldman Sachs, raised his expectations for the S&P 500 earnings growth over the next year because he expected a steady macro outlook to drive profit margin growth. Kostin raised the target point of the expected S&P 500 index over the next 12 months from 6,000 points to 6,300 points, an increase of 5%. According to Kostin's latest forecast, the S&P index will rise more than 9.5% from last Friday's closing level.

On July 9 of this year, Wilson predicted that S&P is likely to face a 10% correction. Since then, US stocks declined overall from late July to early August, and even experienced “Black Monday” on August 5.

At the beginning of September, Wilson warned that unless the Federal Reserve cuts interest rates “beyond expectations,” US stocks will be very disappointed. Since then, senior media sources, including journalist Nick Timiraos, known as the “New Federal Reserve News Agency,” have mentioned the possibility that the Federal Reserve will cut interest rates drastically in September. The September Federal Reserve meeting decided to cut interest rates by 50 basis points. In that month, the US stock market got rid of the “curse” that often fell in September, and the three major stock indexes collectively rose.

Nearly two weeks ago, on September 24, Kostin said that after the election results are released, US stocks will continue to rise, reaffirming that the S&P 500 index will rise to 6,000 points in a year. He believes that concerns about the trend of weak labor market data have been exaggerated, and strong corporate profits will be the main driving force for stocks in the coming months.

At the time, Wall Street News mentioned that since the 2024 target price forecast was released at the end of last year, Kostin has raised the S&P 500 forecast three times. Including recent increases, Kostin has raised S&P expectations a total of four times since the end of last year.