Morgan Stanley said the tax reform bill and performance outlook will boost large-cap stocks in the United States.

Morgan Stanley strategists said that large-cap stocks in the US are attractive because they are expected to benefit from the fiscal spending bill and strong earnings prospects. The team led by Michael Wilson stated that the tax reform bill may improve cash flow and support investment logic in sectors such as technology, communication services, healthcare, and energy. In addition, the breadth of earnings expectations revisions has significantly improved - meaning the number of analysts raising profit expectations minus the number lowering expectations - boosting investor sentiment amid ongoing trade uncertainty, Wilson noted. He reiterated a preference for the financial and industrial sectors, pointing out that recent upward revisions to earnings expectations have been significant in these sectors. "The new tax reform bill is favorable for large-cap indices, as is the strong earnings revision," Wilson wrote in the report.