Due to a robust U.S. labor market, economic resilience, and signs of easing interest rates, two top Wall Street strategists have become more bullish on U.S. stocks.

The well-known Wall Street bear, Morgan Stanley's Chief U.S. Equity Strategist Mike Wilson, is more optimistic about so-called cyclical stocks compared to before, believing that cyclical stocks, which rise and fall with the economic cycle, will perform better than safer defensive stocks. He noted that the strong U.S. non-farm payroll data released last Friday for September, along with expectations that the Federal Reserve will further cut interest rates.

Wilson wrote in a recent report:

"We still believe that in terms of the stock market's reaction to labor/economic growth data, we are in an environment where 'good (data) is good (sign)'. The bond market's skepticism about a soft landing outcome is decreasing, which is an important signal for equity investors."

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Wilson believes that this context is a good omen for small-cap U.S. stocks, which are expected to benefit from improved corporate activity and sentiment, as well as from investors reducing their positions. Due to the relatively dim risk-reward in the short term, Wilson has reduced his long-term bets on large-cap stocks. Among sectors, Wilson upgraded the financial sector to overweight and downgraded the ratings for healthcare and consumer staples.

Another well-known U.S. equity strategist, Goldman Sachs' David Kostin, raised his forecast for S&P 500 earnings growth over the next year because he expects a solid macro outlook to drive profit margin growth. Kostin raised his target for the 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 by more than 9.5% from last Friday's closing level.

On July 9th of this year, Wilson predicted that the S&P was likely to face a 10% correction. Subsequently, from late July to early August, U.S. stocks overall fell, even experiencing the "Black Monday" on August 5th.

At the beginning of September, Wilson warned that U.S. stocks would be disappointed unless the Federal Reserve cut interest rates "beyond expectations." Since then, senior media figures, including journalist Nick Timiraos, known as the "new Fed mouthpiece," have mentioned the possibility of a significant rate cut by the Federal Reserve in September. The Federal Reserve meeting in September indeed decided to cut rates by 50 basis points. In September, the U.S. stock market broke the "curse" of often falling in September, with all three major stock indices rising collectively.

Almost two weeks ago, on September 24th, Kostin said that after the election results were announced, U.S. stocks would continue to rise, reiterating that the S&P 500 index would rise to 6,000 points in a year. He believes that concerns about the weak trend in labor market data are exaggerated, and strong corporate earnings will become the main driver of stocks in the coming months.

Since the end of last year, when Kostin released his target price forecast for 2024, he has raised his expectations for the S&P 500 index three times. Including the most recent increase, Kostin has raised his S&P forecast a total of four times since the end of last year.