New York (CNBC): Investors hoping that tax cuts and aggressive government spending plans will add another leg to the bull market likely are going to be disappointed, Morgan Stanley argues in an analysis that contends the end of big returns is near.
The firm maintains that boosts from fiscal policy are largely priced into the market and unlikely to last much longer.
“The feelgood aspects of said policy appear at or nearly in the price of US markets, whereas the downsides are less accounted for,” the 31-page research paper said. “While there’s a fair amount of debate about how much this fiscal expansion extended the economic cycle, for markets our analysis suggests we’re closer to the end of the day than the beginning.”
Investment implications are a preference for European stocks over U.S. and a view to companies that can maintain operating margins. This will be require a “sector and stock-specific” focus as the bull market hits its peak later in 2018.