S&P 500 to Hit 1,840 on Earnings Growth: Parker

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Sept. 26 (Bloomberg) -- Morgan Stanley's Adam Parker discusses his forecast for the S&P 500 Index and his investment strategy. He speaks with Trish Regan and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)


Before we get to that, 1840? it seems like a big number, but it is only about 8% of the 12 month target.

It sounds like a big number -- we are looking at 2.5% growth right now for the economy and we have a lot of other any factoring data that has not come in.

I think earnings will grow.

The u.s. is going to have a better economic outlook in the next few quarters.

Earnings are going to drag along.

We really don't need the p/e ratio to expand much to get to that target.

We tend to forget that even 4, 5, 6% growth, you should be willing to pay more because you are making more.

We don't have that many costs in place that can make people afraid about a big downmarket.

Maybe the base cases mediocre, but the alternative exit a little more attractive.

With all this in mind, what do you like?

We just talked about betas and where to get juice in your portfolio.

You want to avoid some good cyclicals and avoid some bad cyclicals.

I recently pitched at one of our conferences that i don't think it is that crowded.

I see a lot of doubts about growth and some of the other sectors just look more expensive to me.

I like technology and industrials, generally.

If we do get a bit of a pickup in the economy, i think we will see numbers more achievable there than other parts of the market.

What would be some of the subsectors that would fit that category?

Within health care, it is really pharma and biotech.

Distribution is a business that benefits more demand next year.

In tech, i don't think there is going to be a big, huge capital spending cycle.

I think we are seeing some trends there that look pretty positive.

Why is it that companies five or six years after the low and all the tumult in the market, they are still just dipping their feet in the cap expanding.

-- in the capex spending.

When do you build something?

When your customer calls and order something.

It is that simple.

There is no psychology to it.

It is pretty good for companies because they don't put costs in place that make you inc.

The earnings are going to collapse.

That is the twist.

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