- Morgan Stanley
Adam Parker is Morgan Stanley’s chief US equity strategist.
We recently emailed him five questions for his thoughts on the market, the elections, and where stocks may be headed next.
Here we go:
Akin Oyedele: Only a few strategists at major firms have raised their S&P 500 year-end targets even after the market’s rally this year. The Bloomberg median is 2,175 on 9/26. Why do you think most are still cautious?
Adam Parker: I think there are a number of reasons to be cautious.
Investors appear to think the risks are around a hawkish Fed or US politics right now.
My sense is that a slowdown in the Chinese economy or the US consumer would cause a downside surprise. Oyedele: Your MOST strategic portfolio had a rough start to the year (and you were very candid about this in notes). What have you changed or done differently?
Parker: After five straight years of handily beating the market, the portfolio has been relatively weak this year, barely up in absolute terms. We continue to employ a “quantamental” invest approach, meaning a merger of quantitative and fundamental research. We select from overweight-rated stocks by our fundamental analysts teams, and cull that group down by focusing on names that also screen well in our disciplined frameworks.
Oyedele: What’s the biggest thing on clients’ minds right now that they keep asking about?
Parker: Both the election, and the impact that the Fed could have on the market are dominating the macro questions. Market-level questions are more about sector bets. Investors have been asking the most about the impact changes to the dollar, rates, and oil, can have on the big sectors in the market. Our out of consensus views right now appear to be in utilities, where we recommend an overweight, and technology, where we are underweight.
Oyedele: What’s the extent of the “election risk” to markets, if there’s any?
Parker: There is always risk in the unknown, and hence, there is some risk that the first 100 days post-victory are a bit uncertain for the candidates in this race.
Oyedele: You just updated the big research note on gender diversity. Is a quant approach what Wall Street needs to take this issue seriously? Why has it been so slow?
Parker: Adoption of diversity as a consideration for screening stocks is at an inflection. Any time we can show that investors can make more money with less volatility, they pay attention.