Investors looking for evidence of a broad and strong economic recovery should probably steer clear of Morgan Stanley (NYSE:MS). The investment firm’s U.S. Equity Strategy team recently released its 2013 stock market outlook, and it contains an eye-opener.
Adam Parker, Managing Director and Chief U.S. Equity Strategist at Morgan Stanley, offers a slew of interesting views on the overall market in the report. Interestingly, he points out that the majority of earnings growth this year comes from only 10 major companies. In fact, these large firms account for 88 percent of all year-over-year earnings growth in the S&P 500, as of November 23, 2012. Furthermore, the top four corporate giants account for more than 50 percent of the growth.
The Top 10 Contributors are listed below, along with their share performance year-to-date:
- Apple (NASDAQ:AAPL): 45 percent
- Bank of America (NYSE:BAC): 77 percent
- American International Group (NYSE:AIG): 42 percent
- Goldman Sachs (NYSE:GS): 33 percent
- Wells Fargo (NYSE:WFC): 19 percent
- JPMorgan Chase (NYSE:JPM): 22 percent
- International Business Machines (NYSE:IBM): 5 percent
- Citigroup (NYSE:C): 35 percent
- General Electric (NYSE:GE): 17 percent
- Western Digital (NYSE:WDC): 16 percent
Is It Any Wonder Why Many of these Companies Received a Bailout?
Parker was the most bearish strategist on Wall Street last year…
Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.
He predicted an earnings drag in 2012 would lead the S&P 500 to close the year at 1,167. Parker was correct about the bearish earnings call, but he underestimated the power of the Federal Reserve and its ability to juice markets higher.
Earlier this year, Parker wrote, “We had though that most investors would decide this ‘heroin’ wasn’t worth it. We forgot what it means to be an addict. We were wrong and clearly mis-calibrated the strike price of the Fed ‘put.’ Maybe not ultimately wrong, and maybe not even by year-end, but for sure over the past few months we were wrong about the demand for this kind of artificial stimulus.” Parker has a year-end 2013 S&P 500 price target of 1,434, with bull and bear targets of 1,733 and 1,135, respectively.
As of November 23, about 97 percent of S&P 500 companies had reported third quarter earnings. Overall, the firms only showed a 0.1 percent gain in profit growth, according to Investor’s Business Daily and data from Thomas Reuters. Meanwhile, revenue growth sank 0.8 percent. It was the weakest growth for profit and revenue since the third quarter of 2009.
Investor Insight: Apple Becomes Bigger Part of Thanksgiving Feast