MSSB’s Darst: Three criteria needed for a new secular bull run
Morgan Stanley Smith Barney's chief investment strategist remains optimistic about America's future, citing the country's ability to innovate.
While Bob Turner has listed his seven reasons why the millennials—or those young people born after 1980—could lead the next great bull market in stocks, David Darst, chief investment strategist for Morgan Stanley Smith Barney, has now offered three criteria that need to exist in order for that bull to take off running.
Speaking during a webinar on Wednesday morning, Darst said that a long-term secular bull market run (the last of which ran from 1982 to 2000) will only happen when there are compelling valuations; when voters reach a point where “they want to encourage and urge politicians to do things that are confidence-building and job-creating; and when structural reforms have been put in place, including with education and infrastructure savings, “societal disparity” and the role of the dollar in the global monetary system.
While Darst noted that the U.S. faces significant economic challenges right now, including concerns that we are entering a period of deflation, he also expressed optimism about the country’s future because of the “innovativeness” that it exists here.
“Our country is going to shock the world with the things we produce and offer the world,” Darst said.
Other highlights from Darst’s webinar:
– He says monetary authorities including the Fed still have “more bullets” to use in order to strengthen the economy. A lot of these bullets, he noted, are verbal, such as an “expression of commitment that we’re going to keep interest rates at a very low level.”
– The “major bullet” that the Fed has to use, Darst added, is its ability to develop a coordinated front with the other central banks around the world. “As parents we want to see the teacher being decisively in charge of a room,” he said.
– If the Supreme Court decides to strike down any portion of Obamacare, Darst said the markets will react positively. “It’s a tough one to call because it’s political, but it would be seen as keeping government under control which markets tend to like,” he said.
– MSSB’s economists are calling for 2.1% growth for the U.S. in 2013. Darst said that investors should stay balanced and not “swing for the fences” with a risk on/risk off approach.
– He is especially bullish on the “global gorilla” growth stocks, including Apple, McDonalds, Johnson & Johnson, Pfizer and Coca-Cola.
– On the fixed-income side, Darst likes high-grade corporate bonds where investors can get some yield.
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