Morgan Stanley says tax reform bill and earnings outlook will boost U.S. large stocks

Morgan Stanley strategists say large US stocks are attractive because they are expected to benefit from the fiscal spending bill and a strong earnings outlook. The tax bill is likely to improve cash flow, supporting investment logic in sectors such as technology, communications services, healthcare and energy, according to the team led by Michael Wilson. In addition, a significant improvement in the breadth of forecast revisions - that is, the number of analysts who raised their earnings forecasts minus the number who lowered their forecasts - has boosted investor sentiment against the backdrop of continued trade uncertainty, Wilson noted. He reiterated his preference for financials and industrials, noting that earnings forecasts for the sector have been revised up more recently. " The new tax reform bill is good for large-cap indexes, as is the strong EPS revision, "Wilson wrote in the report.