Bond markets would likely benefit if U.S. President Joe Biden is re-elected as his administration will try to raise taxes to offset some of the government spending, Morgan Stanley's chief investment officer said on Wednesday.

However, under the scenario that former President Donald Trump were to win the Nov. 5 election, it "would be better for growth but worse for bonds", Morgan Stanley CIO Michael Wilson told the Reuters Global Markets Forum.

Over the last 12 to 18 months, investors have favored high-quality large-cap stocks that have seen earnings revisions, which in turn generated alpha for these stocks, Wilson said.

Alpha is a measure of an active fund manager's performance that indicates their ability to generate returns above a benchmark index.

"The alpha is not so much at the sector level but at the stock level," Wilson said.

"Earnings revisions, both up and down, (are) providing a great alpha opportunity for active investors, which many of our institutional clients have been capturing this year."

Companies and analysts revise earnings to include new information about their performance or to account for changes in the economy.

"For long-only managers, it comes down to stock picking, and for macro-investors or risk-parity managers, the bond part of the portfolio continues to be de-emphasized in favor of commodities and currencies," he said.

Of the 1,379 U.S. companies that reported earnings in the week ending June 7, 788 saw an upward revision in estimates while 591 saw a downward revision, according to data from LSEG IBES.

While U.S. first-quarter earnings growth remains stronger than expected, executives at companies with smaller market capitalization have hinted at softer consumer demand and muted loan growth.

Morgan Stanley remains "overweight" on large-cap companies.

"We ought to own stocks with positive earnings revision in the economic and political backdrop we have, and that lends itself to large-cap quality stocks," Wilson said.

Of the 496 companies in the S&P 500 that reported earnings till June 7, 78.6% exceeded analyst estimates, above a long-term average of 66.7%, according to data from LSEG.

"For stocks, it's all about earnings growth - what companies can grow earnings and cash flow faster than inflation, and more importantly, expectations," Wilson said.

"The risk today is that this is well-understood, and so anything with growth is now expensive."

From the political standpoint, Wilson said immigration rules under either administration will be keenly watched.

A Biden win would be "more favorable for labor supply and inflation," he said, while a Trump victory would "shut down borders," possibly rekindling inflation concerns.

Wilson expects the energy and financials sectors along with small-caps to gain if Trump gets into office, and large cap growth companies benefiting from a possible Biden victory. (Join GMF, a chat room hosted on LSEG Messenger, for live interviews: https://lseg.group/3TN7SHH) (Reporting by Mehnaz Yasmin in Bengaluru; Editing by Divya Chowdhury and Lisa Shumaker)