Why Morgan Stanley Is Overweight on the Technology Sector
Large-cap growth stocks have performed well so far this year. Many investment firms and market participants are expecting value stocks to perform well in the near term.
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On a year-to-date basis, the Russell 2000 index (IWM), which tracks the performance of small-cap stocks, rose nearly 10.4% as of October 2, 2017. The PowerShares QQQ Trust (QQQ), which tracks the performance of US large-cap technology stocks, rose nearly 19.3% during the same period.
Mike Wilson, chief equity strategist at Morgan Stanley (MS), said his firm is overweight on the technology sector (XLK). He said in a note to clients that “the prospect of tax reform should disproportionately benefit energy, tech, healthcare, telecom and small cap stocks.” He also said, “Our confidence level in tax reform/cuts has risen with the administration’s demonstrated political success around ACA1 repeal.”
As we saw in the previous part, the rising hope for tax reform is making new highs in the S&P 500 index. The simplification of the tax structure both for the individual and corporations could give the economy a huge boost. Many analysts and fund managers are expecting it could increase the US GDP another 1.0%.
Major technology stocks Apple (AAPL), Facebook (FB), and Google (GOOGL) have had strong performances so far this year. Their strong business fundamentals are driving these stock prices. Faster innovation and improving demand for technology are playing major roles in the technology sector.
You may be interested in reading Delivering Alpha: Where Fund Managers Are Placing Their Bets.
- Affordable Care Act ↩