Morgan Stanley: QE3 Not Enough to Help Equities, Look For QE4
By Michael Aneiro
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STOCKS
Seems there might be something to this whole stimulus-addiction thing after all. The ink on the Fed’s QE3 announcement is barely dry, but that’s not stopping Morgan Stanley from labeling the Fed’s latest easing effort a disappointment already and calling for QE4, as it does in an equity research report Monday:
QE3 will likely be insufficient to significantly boost equity markets and we wouldn’t be at all surprised to see the Fed dramatically augment this program (i.e., QE4) before year-end, particularly if economic and corporate news continue to deteriorate as they have over the past few weeks.
Morgan Stanley acknowledges that the Fed’s ultimate aim is stable pricing and full employment, but it says key near-term feedback from equity markets could prove disappointing. Although QE3 is open-ended, Morgan Stanley says the pace and program of Fed bond purchases is much smaller than previous quantitative easing programs, and at this pace the expected contribution to the S&P 500 from QE3 is expected to be 15-25 basis points per week. This is much smaller than average weekly market volatility, which has averaged 2.3% since 1980. MS says QE3-related gains could cumulate to 3-4% return by year-end, but it sees headwinds – namely negative earnings revisions and reappearance of tail risks – that could “dominate and more than offset” potential gains. MS also cites evidence of diminishing returns to the entire QE enterprise.
During QE3 and any subsequent programs, Morgan Stanley says investors should favor growth stocks and lower-quality equities. Net of systematic effects, MS says healthcare stocks have performed best, while discretionary and telecom stocks have underperformed. MS lists among its top healthcare portfolio holdings AmerisourceBergen Corp. (ABC), Bristol-Myers Squibb Co. (BMY) and Pfizer Inc. (PFE). MS says it’s added Stryker Corp. (SYK) to its portfolio and reduced its exposure to Target Corp. (TGT), increasing its overweight in health care and recommending a further underweight on discretionary names.
Fellow Barron’s blogger Avi Salzman points out that the Morgan Stanley strategist who was lead writer on this report, Adam Parker, also reiterated last month his prediction that the S&P 500 would finish the year at 1,167. At that time the S&P 500 was at 1,404. It’s at 1,454 today. QE3 would have to really disappoint to see stocks fall that much by year-end.作者: CoolMax 时间: 2012-9-27 12:35
