Morgan Stanley’s Adam Parker Capitulates

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 . . .

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