Until, not so long ago, Morgan Stanley’s Adam Parker was one of the most bearish analysts on the street. He had consistently violated one of the first rules of the market: Never mix politics with investing.
Following last year’s 30% S&P 500 rally, he has had a change of heart. He now has a 3000 upside target for the S&P 500.
I don’t really follow Parker closely — he simply has been too wrong for too long for me to put much weight on his analysis. But I give him kudos for reversing himself — many other analysts and investors have been unable to go 180 degrees from their prior investment postures and statements (John Hussman, Gold bugs, etc.).
Regular readers know I have a negative view on the dark art of forecasting.
BI has a bulleted summary of Parker’s key points:
• The world economy is not in sync. Major regional economies are at different points along the growth cycle. In general, DM is leading while EM is lagging.
• Volatility in the U.S. continues to trend lower, which can extend the life of expansions.
• Deleveraging in the U.S. is ongoing, albeit largely complete, and balance sheet priorities have shifted.
• Interest payments on debt burdens are ultra-low, and household debt dynamics suggest there exists a sizable cushion protecting consumers in a rising interest rate environment.
• Capital spending and inventories do not look stretched.
• Corporate management hubris and other corporate metrics of overheating remain muted.
• Several broad economic indicators in the U.S. have only just reached “normal” expansionary levels and are far from looking unsustainable.
If you were looking for a capitulation from a major bear, this might be it . . .