Further, according to BofA estimates, the surge in year end EPS forecasts means that about 40-50% of the tax reform's benefit of $13 EPS is now backed in.
he continues to hear both clients and commentators suggest that tax cuts have not been priced and the powerful extension of the rally the past few weeks has only emboldened those with that view.
Morgan Stanley then admits that “we have been surprised at how fast forward EPS estimates have moved up post the signing of the tax deal. We thought it would be more gradual as companies hesitated to provide clear and detailed guidance on how tax would affect 2018 EPS, or indicated that it might not be as exciting as some were hoping–like FAST and AXP.”
Wilson then suggests that contrary to BofA's take, the tax cut is not only fully priced in, but the next move will be lower as multiples start to contract:
However, we are skeptical it will exceed $155 when all is said and done. Meanwhile, the multiple has also been rising suggesting the market is now expecting a further rise toward $155 or higher.
