Headline: Morgan Stanley: Dollar Weakness in H1 2026, Recovery Into 2026; US Stocks Seen Outperforming
Key Takeaways
The US dollar may face early headwinds next year, according to a new global outlook that points to softer growth and policy frictions. Morgan Stanley expects the dollar index to slide in the first half of 2026 before staging a recovery by year-end, while US equities continue to lead global markets.
The bank’s base case sees the US Dollar Index falling toward 94 in H1 2026, then rebounding to roughly 99 by the end of the year. The path is shaped by slower global growth, the drag from tariffs, and the risk of a more K‑shaped economy. In this environment, US stocks are projected to outperform international peers: the S&P 500 is forecast to rise about 14% in 2026, versus roughly 4% for MSCI Europe and a modest decline of around 1% for MSCI Emerging Markets.
Commodity calls are equally striking. The outlook envisions gold advancing toward $4,500 per ounce and copper reaching approximately $10,600 per ton, reflecting a supportive mix of macro hedging demand and structural supply constraints. By contrast, Brent crude oil is expected to remain anchored near $60 per barrel amid a soft supply–demand balance. For currency and equity investors, the firm’s roadmap suggests staying alert to dollar volatility while positioning for continued US leadership across risk assets.
Key Points – Dollar Index seen dipping to about 94 in H1 2026, then recovering to around 99 by end-2026 – Slower global growth and tariff impacts underpin a more uneven, K-shaped backdrop – US stocks expected to lead: S&P 500 +14% vs. MSCI Europe +4% and MSCI EM about -1% in 2026 – Gold forecast near $4,500/oz; copper around $10,600/ton – Brent crude oil projected to hover near $60/bbl on soft supply–demand dynamics
