Good earnings and clarity on tax reform will likely send the S&P 500 10 percent higher over the next 12 months, according to Morgan Stanley's chief U.S. equity strategist Michael Wilson.
"Tax legislation remains the most important political issue for the U.S. stock market as we get later in the year," Wilson and his team of equity strategists said in a Monday note. "However, we think investors have been willing to give the market a 'pass' for now because there is nothing baked into 2017 earnings estimates for a tax cut, making earnings appear very achievable for the remainder of this year," the report said.
Wilson has an S&P 500 12-month price target of 2,700, the most bullish among 16 equity strategists surveyed by CNBC, and 9.8 percent above Friday's record close of 2,459. Wilson is also chief investment officer at Morgan Stanley Institutional Securities and Morgan Stanley Wealth Management.
S&P 500 earnings are set to grow for a fourth-straight quarter, up 6.2 percent in the second quarter, and are setting up for a record 12-month high of $123.61 in earnings per share, CFRA Chief Investment Strategist Sam Stovall said in a July 10 note. His 12-month forecast for the S&P 500 is 2,540, just over 3 percent above Friday's close.