- A $4 team led by Michael Wilson expects the $4 to reach 3,900 by December 2021, implying an 8% rally from current levels.
- Stock-picking will play an increasingly important role in separating winning investors from those trailing the market in 2021,
Morgan Stanley strategists said Monday. - Investors should seek out companies that can deliver earnings growth that hasn't yet been priced in, the bank said.
- Last week's rotation to
value stocks suggests Treasury yields bottomed in August, and is a good sign the US economic recovery is on track, the team added. - $4.
The ongoing equity bull market will remain intact over the next year, says $4. The firm expects the $4 to rally to 3,900 by December 2021, implying an 8% climb from current levels.
Morgan Stanley also says stock-picking will play an increasingly important role in separating winning investors from the rest. With interest rates set to rise as the economy recovers in 2021, investors who can find hidden gems in the market will be best positioned to outperform, the team wrote.
"2021 will be much more about stock picking and should favor those companies that can deliver earnings growth that isn't already expected or priced," the team said.
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To that end, the strategists recommend looking for underappreciated stocks in cyclical sectors and across value names as the economy gradually recovers and a vaccine nears distribution. Companies with their earnings closely tied to reopening and gross domestic product growth will also outperform, they said.
Supporting Morgan Stanley's bull call is recent progress towards a COVID-19 vaccine and signals that an economic recovery is underway.
Last week's positive vaccine update from Pfizer and a market-friendly election outcome drove swaths of investor cash from bonds to value stocks and cyclicals. The recent outperformance of small caps and rising yields suggest Treasurys "bottomed at the end of August," the strategists said, adding that "we think it is a good sign the economic recovery is on track."
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Morgan Stanley's S&P 500 bullishness matches optimism elsewhere on Wall Street.
Goldman Sachs $4 as a divided government and vaccine advancements lift investor sentiments. And JPMorgan strategists said in a November 9 note that the S&P 500 $4, adding the aforementioned factors make for a "market nirvana."
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