The GIC Weekly | 27 Apr 2026 | Morgan Stanley Wealth Management

"Meeting and Beating" Versus Revisions

While Washington awaits a more formal end to the war in Iran, US equities have moved on, refocusing on the 2026 bull case. Having climbed a wall of worry, markets have resumed their pre-Halloween emphasis on momentum, cyclicality and tech. Furthermore, with richly valued stocks again hitting all-time highs, attention has turned to earnings, where solid first quarter results and positive consensus forecast revisions have become the anchor for further price gains. Although we continue to believe that 2026 earnings, exhibiting 12%-13% growth, will drive a fourth year of S&P 500 gains, we remain cautious about ebullient 17%-20% profit-gain forecasts. Markets can "look through" some fundamental factors as transitory but corporate earnings cannot. Investors relying on positive revision trends thus might take care, given decoupling from key indicators like GDP growth. Revisions, often based on unsustainable semiconductor and energy pricing, are also very concentrated. Finally, while analyst revisions can be important, their predictive power for market returns is only middling. It's time to closely examine what companies are doing and delivering, not what they're promising. Consider focusing on active equity strategies to balance passive index exposure. Happily for active managers, some stocks are "on sale" in tech, software, health care, consumer sectors and financials. We are reducing positions in overbought semiconductors. In EM, focus on Latin America over Asia. Hedge funds, gold, REITs, secondaries, venture capital/growth equity and infrastructure remain key allocations.