TMTPOST -- Morgan Stanley expects a “rolling recovery” in corporate earnings to fuel a 12% rise in the stock market over the next 12 months, with the S&P 500 potentially climbing to 7,200 by mid-2026. The bank said the market turbulence seen in April—triggered by tariff announcements from Donald Trump—marked the conclusion of a “rolling earnings recession” that began in 2022. In its place, a broad-based recovery is gaining momentum, supported by multiple tailwinds. “We now appear to be shifting into a rolling recovery phase,” wrote Michael Wilson, chief investment officer at Morgan Stanley. He cited several catalysts driving the rebound, including positive operating leverage, increased AI adoption, a weaker U.S. dollar, tax savings from the OBBBA legislation, easier year-over-year growth comparisons, pent-up demand across sectors, and a high likelihood of Federal Reserve rate cuts by the first quarter of 2026. Wilson added that while some investors remain concerned about elevated valuations, current market levels appear to be justified in light of these supportive factors. The bank also noted that the odds of reaching its bullish scenario for the S&P 500 are increasing.