U.S. stock index futures are modestly lower on Monday, but indexes remain near record levels, suggesting an upward momentum for equities that Morgan Stanley expects to continue.
The firm issued a new 12-month target of 2,125 for the S&P 500, above the 2,050 target the firm gave in a note to clients on Friday. From current levels, Morgan Stanley's new target represents upside of 5.8%.
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"Our base case is low growth, with modest margin expansion," the firm wrote, adding that the most likely scenario was "fits and starts of improving news.".
Within equities, Morgan Stanley wrote that small-cap stocks were "poised to outperform" throughout the rest of 2014, citing the specter of more margin expansion. "We don't think all investors realize that small-cap margins are below their long-term average today," it wrote.
Futures snapshot at 8:34: