America’s biggest companies will soon face a reckoning as critical tax cuts expire — and Morgan Stanley has built a playbook for investors looking to get ahead of it

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Morgan Stanley says several sectors face big challenges as parts of the Trump-backed corporate tax cut start to fade and internet taxes rise.

, a strategist for Morgan Stanley says rates are about to start rising, which will create new challenges for much of the market.

Morgan Stanley breaks down which areas of the stock market will be most impacted. It provides investors with a playbook for what to buy, and what to avoid., those cuts are starting to shrink in the rear view mirror and there are signs of trouble ahead.— the overhaul passed at the end of 2017 — start to lose power or expire in 2021 and 2022. That means many companies will get a tax increase that hurts their profits, said Morgan Stanley strategist Michael Zezas.

"Expiring provisions from the Tax Cuts & Jobs Act will soon make capex and R&D more expensive," Zezas wrote in a recent note to clients."Further, international reforms will start to hit US multinationals this year." For investors wondering what to do, Zezas broke down which parts of the market might feel the most pain if the provisions outlined above expire. They're listed in this chart, which shows several sectors — most notably communication services, healthcare, industrials, and tech — are looking at big obstacles starting in 2021.

Further, the changes in the way R&D spending is amortized could affect a wide swath of companies, Zezas said.

 

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