Morgan Stanleys negativa syn (en av alla tyckare på MS; Adam Parker). Jag har markerat det viktigaste med rosa.

The market rally in the US and the multiple expansion we have seen year-to-date have been surprising. In today's note, we review the case for caution and provide an update on investor sentiment. Here are five areas of discussion:

1) "Europe doesn't matter?" We have heard this sentiment from investors over the past weeks. Our view is that the risk-reward is skewed to the negative and the specter of US companies guiding down due to exposure to an economy in recession by April or July is high.

2) Green shoots? Despite the strong jobs report two weeks ago, we think that the US economy will decelerate. Lower savings, inventory builds, lower gas prices at the pump, better weather, and the accelerated depreciation portion of the 2010 fiscal stimulus all helped the Q4 economy and will likely not help as much in the first half of 2012. The last time the jobs data were this good, in May of 2010 or April of 2011, it was basically the top of the market for each of those years.

3) Next year is next year: We admit that investors don't often sharpen their pencils on "out year" estimates until July. But there could be a huge fiscal pothole in 2013. The sunset of the 2010 fiscal stimulus and the Bush tax cuts leaves the potential for a 300 bp pothole for US GDP in 2013, and the economy is barely growing 300 basis points. At the same time, current bottom-up EPS estimates for 2013 accelerate to 13% EPS growth ($119 in EPS). In addition, we think the uncertainty around the 2012 election might make CEOs sit on their hands regarding spending (IT spending, capital spending, etc.), slowing the economy in the second half of 2012, something very few investors are talking about now.

4) China is improving: If Chinese GDP is solid this could cause another leg up in equity markets. However, our regional experts (EM Equity Strategist Jonathan Garner) and EM Credit Strategist Viktor Hjort) both reduced their outlooks for risk assets last week.

 

5) Missing estimates is good? We have been surprised by the amount of multiple expansion in the last couple of months. Why? Because this has been the worst EPS season in well over two years. Companies are barely beating on revenue and beating on EPS in large part because of surprisingly low tax rates. A number of companies have been reporting lower tax rates than they guided analysts to in October. Bottom-up estimates for SPX EPS in 2012 peaked at $114 in August and are now at $105 and change...declining sharply in the last few weeks