Morgan Stanley says tax reform bill, earnings outlook will boost U.S. large-cap stocks

07/14 12:05

Morgan Stanley strategists said that large US stocks are attractive because they are expected to benefit from the fiscal spending bill and strong earnings prospects. The team led by Michael Wilson said that the tax reform bill may improve cash flow, thereby supporting the investment logic of sectors such as technology, telecommunications services, healthcare, and energy. In addition, the breadth of earnings expectations revisions has significantly improved - that is, the number of analysts raising profit expectations minus the number of analysts lowering expectations - boosting investor sentiment amid ongoing trade uncertainty, Wilson pointed out. He reiterated a preference for the financial and industrial sectors, noting that the recent increase in profit expectations for these sectors has been significant. "The new tax reform bill is favorable for large cap indices, as is the strong earnings revision," Wilson wrote in the report.

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