Morgan Stanley har løftet sit target for S&P 500 fra 2700 til 3000 ved årets udgang. Banken ser mange risici i high-tech selskaber og advarer mod blindt at købe de aktier, der hidtil klarede sig godt. Banken opprioriterer small caps og nogle cykliske aktier.
Uddrag fra Morgan Stanley:
As a result of last week’s actions by the Fed and the market’s reaction to it, we are raising our year end S&P 500 price target to 3000 from 2700 with a bull case of 3250 and a bear case of 2500. Our target increases are purely a reflection of higher valuations, resulting from a faster and fuller normalization of the equity risk premium. If there’s one lesson we’ve learned during this financial repression era, it’s that when risk premium appears, you better take it before it disappears. The Fed’s direct intervention into high yield credit markets suggests investors may have to move more quickly than they would like or they will miss what are attractive risk premiums in a longer term context. Given last week’s move in equity and credit markets were exceptionally strong, a pullback would not be surprising, but pullbacks should be bought.
We’re also upgrading U.S. small and mid-cap stocks today. As illustrated in our “Recession Playbook” we published last month, small and mid-caps typically lead equity markets out of the trough and last week’s relative outperformance looks like a kickoff move to what could be a new trend. We’ve been underweight this area for the past two years on the view that these stocks typically underperform at the end of the cycle. Furthermore, smaller companies have been some of the biggest bad actors of the past cycle with their excessive borrowing. However, with the stimulus directed right at corporate credit, and small and medium businesses in particular, these companies are now potentially the biggest beneficiaries which means they could outperform from here.
Finally, as we enter first quarter earnings season, idiosyncratic or stock-specific risk may be higher than perceived. Macro factors have understandably dominated the price action recently, leaving stock specific risk at a 40 year low. Meanwhile, price return dispersion is high, suggesting individual stock betas may be increasing simultaneously with the macro influences. This kind of combination tends to occur in recessions. Macro dominates price at the same time micro outcomes become less certain. Given the steepness and suddenness of this recession, the combination of low stock specific risk and high price return dispersion has never been more extreme.
Stock prices reflect many inputs, but expectations tend to drive near-term price movements more than anything else. In short, high expectations stocks can be disappointed by good news that isn’t good enough. While low expectations, stocks can often ignore and look past seemingly terrible news. We suspect first quarter earnings season, which begins this week, will bring generally bad news. This could lead to a higher than normal number of surprising price moves when companies report.
In particular, our work suggests expectations remain more elevated in the large cap technology sector, which suggests potentially higher downside risk to these stocks than other out-of-favor sectors. Recessions hit everyone hard, especially one that arrives so suddenly. And tech stocks appear more vulnerable based on the very modest earnings revisions to date. The recent underperformance of the Nasdaq relative to the S&P 500 suggests the market is aware of this phenomenon and is concerned too. Our advice is to buy the dips from here, but don’t favor the former leaders so much. Instead, look to add in small midcaps and some of the more cyclical areas that have been out of favor for years.
