Morgan Stanley was bold with its recommendations in a report on sectors to buy for bullish investors.
"With the market off its highs and our view of EPS unchanged, we are once again bullish, buying consumer discretionary, technology, and energy, while maintaining our overweight in healthcare, in anticipation of hitting new highs over the coming months," the note began.
Morgan Stanley sees 2,050 on the S&P 500 in one year (5.5 percent upside). Reasons for the upside include an improving economy, higher inflation adjusted yields and an easy money policy from the Federal Reserve.
Regarding corporate earnings, the note stated, “So how would we call the top of the cycle? Our view is that hubris and debt define the top of every cycle,and as such, we monitor signs of growing costs that could ultimately translate into more downside to corporate earnings.Today, it is very hard to make that argument.”
Investors should look for aging backlogs and high book to bill ratios in technology and industrial companies before capital spending will increase, according to Morgan Stanley. Higher capital spending would create earnings downside risk.
Further, corporate debt does not seem to be a cause for concern.
Related Link: Risks Of PreMarket And After-Hours Trading
Sectors To Buy And Sell Technology
The technology sector was upgraded from Market-Weight to Overweight. Vantiv (NYSE: VNTV) was added to the MOST Strategic Portfolio with a two percent weighting.
The materials sector was cut from Overweight to Market-Weight. Royal Gold (NASDAQ: RGLD) was removed from the MOST Strategic Portfolio.
Energies & Utilities
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