Morgan Stanley strategist: COVID’s impact on S&P500

This week, AlphaSense sat down with Adam Virgadamo, US Equity Strategist at Morgan Stanley, to discuss life after Covid, focusing on the S&P 500 and macro trends.

In the webcast, Virgadamo explained the secular bull market, earnings growth, stock market leaders, and which stocks will be impacted by emerging themes after Covid.

According to Virgadamo, this earnings season has already demonstrated that numbers/guidance have been revised too low and already starting to rise, particularly on the basis of cost savings and a faster reopening than expected.

Referring back to Ellen Zentner’s four-scenario framework for life after Covid, Virgadamo states that in each scenario, GDP growth (and the output gap) will return to pre-Covid levels, if not higher.

The past few years have been defined by a rising concentration of market cap in the S&P 500, with only five companies (or 1%) accounting for over 20%. The last few months since Covid have actually extended this concentration because you have this historically unique circumstance where the largest companies in the S&P were also the companies that were able to adjust to a remote work world.

s&p500chart

As five tech companies continue to dominate the stock market, Morgan Stanley asked analysts about their view on how the world is changing. The responses resulted in nearly 50 themes across equities broadly, which rolled up into six broader categories.

covid-themesEmerging themes in life after Covid (Work from Home, E-Commerce, E-Services, Experiences & Travel, Tech-Enabled Transformation, Social Reallocations). Source: Morgan Stanley Research

“Work from home” is a major theme, with an emphasized importance on connectivity, shifts in consumption, increased demand for housing, and increased online ad share. Other broad categories such as E-Commerce, E-Services, Experiences & Travel, Tech-Enabled Transformation, and Social Reallocations made the list, with many important themes below them.

Virgadamo dug deeper into these themes, including how spending will shift and which stocks will face headwinds or tailwinds in 2020. To read the full report (or to read more Morgan Stanley research) login to AlphaSense, or start a free trial. To access Adam Virgadamo’s full webcast, please explore our Expert Briefing Series.

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