Morgan Stanley's Parker: 'Calm Down ... We're Near the Bottom'
Thursday, 16 Oct 2014 08:46 AM
By Dan Weil
Adam Parker, chief equity strategist at Morgan Stanley, doesn't see the stock market correction going much further, if at all.
The reason: third-quarter profits.
"I'm focused on the corporate earnings," he tells CNBC. "I think that generally you're going see earnings grow year over year, and I don't think the S&P 500 really ever goes down 10 percent unless people are afraid of that."
The index has slid 7.8 percent from its Sept. 19 record high, closing Wednesday at 1,862.49.
"I'm trying to keep my eye on the ball here and say, 'Guys, calm down,'" Parker notes. "Earnings are growing. There are buybacks. There is a dividend. We have a good set of companies here."
Several companies already have reported strong third-quarter earnings, including Intel and BlackRock.
Parker favors small-cap, healthcare, consumer discretionary and technology stocks.
"It's kind of regular for these things to happen in an upcycle," Parker explains, noting that there have been 16 pullbacks of at least 4 percent in the S&P 500 since March 2009.
The market's last two corrections of 10 percent occurred in 2010 and 2011. "I don't think we're in quite as dire a position now as we were in either of those instances, so I'm pretty constructive," he states. "I think we're near the bottom."
Others haven't given up on stocks either.
"Investor sentiment has clearly been pummeled of late, as some signs of surrender are forming," Tobias Levkovich, Citigroup's chief U.S. equity strategist, write in a commentary obtained by Bloomberg.
"While no one ever rings a bell at the bottom and there is not generally a cathartic, cataclysmic crescendo of capitulation, fear is emerging, which intimates that a floor may be within reach."
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Poster Comment:
What goes up, must come down. Simple law of physics. ;)