Buy US stocks as tax and spending plans are 'still unappreciated,' says BlackRock – MarketWatch

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As the short week for traders kicks off, a big question is whether the mighty mid-month rally for stocks looks like a fake-out or not.

Morgan Stanley strategists say the real-deal selling for U.S. stocks isn’t going to hit quite yet. They view this year’s second quarter as more likely to bring a big serving of selling — a “main course,” rather than just an “appetizer.”

The world’s largest asset manager — BlackRock — also is weighing in, providing our bullish call of the day.

“We have upgraded our tactical view of U.S. equities to overweight from neutral,” says the company’s global chief investment strategist, Richard Turnill.

“The reason: Impending fiscal stimulus is supercharging U.S. earnings growth expectations.”

Hasn’t the market already priced in the tax cuts and the latest budget? Not according to Turnill.

“We believe the coming positive effects of new U.S. tax and spending plans are still underappreciated by markets,” he writes in a note dated Monday.

Don’t stocks SPY, +0.03% look pricey?

“Earnings growth matters more than valuations over shorter time horizons at this stage of the bull market,” Turnill says.

BlackRock, which manages $6 trillion in investor money, especially likes American financial XLF, -0.14% and tech stocks XLK, -0.15%  , as well as momentum MTUM, -0.10% and value plays VTV, +0.12%  . It also has downgraded European equities VGK, +0.10%  to neutral from overweight.