Investing.com -- Morgan Stanley is cautiously leaning bullish on U.S. equities, arguing that markets are further along in pricing out uncertainty than many investors appreciate, even as geopolitical risks and central bank inflation concerns keep sentiment fragile.

Analyst Michael Wilson noted that the S&P 500 held the low end of Morgan Stanley's targeted correction range of 6,300 to 6,500 and has since rebounded 7% from its lows over the past two weeks.

"The market waits for no one," Wilson wrote, advising investors to be ready to add risk on any pullback, even if peace talks stalling over the weekend and central bank vigilance on inflation causes a near-term retest of support levels.

Wilson believes a strengthening earnings backdrop underpins the constructive view. S&P 500 trailing earnings growth stands at 15%, with next twelve-month earnings up over 20% year-on-year.

First- and second-quarter 2026 EPS estimates are up 1% and 4%, respectively, since the end of February, and earnings revisions breadth has remained resilient since the war in Iran began.

Morgan Stanley's preferred positioning is a barbell of cyclicals (Financials, Industrials, and Consumer Discretionary) where earnings remain strong, and valuations have compressed, alongside quality growth names, including hyperscalers, where sentiment and valuations have reset.

On energy, Wilson said the market is signaling that oil and gas prices have peaked, with energy stocks' relative performance already appearing to have turned lower.

"The solution for high commodity prices is high commodity prices," he wrote, arguing that demand destruction and production increases will eventually resolve the supply shock.

"Bottom line, our rebalancing thesis is starting to play out and underlies our more bullish view than most on where things will be in 6 months," commented Wilson. "We think the market understands this dynamic as well, which is another reason why this correction is largely over."