With the reform plan aimed at spurring activity domestically, companies which do more business within the U.S. should be prime beneficiaries.
which’s why Morgan Stanley likes little- in addition to mid-cap stocks as a reform play, in addition to can be growing wary of the high-flying tech sector which has led the market so far in 2017.
“Part of our call on the cycle has been our call on SMID cap stocks, which we believed might be relatively large beneficiaries of tax reform, deregulation, in addition to animal spirits as domestic activity in addition to M&A picked back up,” equity strategist Michael Wilson said. “As sentiment has grown around tax reform since the late summer, This particular trend has been playing out yet we think the item has further to go.”
While the firm still has an overweight rating on technology, Wilson said the latest sell-off could be “a cautionary note about what may eventually unfold within the sector as the market starts to cost in a tired cycle over the course of 2018.” He suggested investors may want to buy tax reform winners by selling This particular year’s tech proceeds.
The trend could be played out by funds which hold high concentrations in tech. Hedge funds are 40 percent weighed in a sector which David Kostin, chief U.S. equity strategist at Goldman Sachs, said might receive “limited relative benefits by tax reform, elevated valuations, in addition to risk of government regulation.”
One various other area which could benefit, though: aerospace in addition to defense.
Analysts at Baird said the average tax rate for the industry can be 28 percent in addition to the sector generates about three-quarters of its revenue domestically.
Among the stocks which Baird likes are BWX Technologies, Mercury Systems in addition to Spirit AeroSystems Holdings.
WATCH: A look inside the tax reform rally.