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Morgan Stanley Strategist: Stay Defensive on Stocks

Friday, 9 Dec 2011 | 4:32 PM ET

It's a global economy, and no matter what happens in Europe the U.S. economy is looking at a first-quarter stock selloff if earnings don't meet analyst expectations, said Adam Parker, Morgan Stanley's chief equities strategist.

"The big issue is no matter what happens [in Europe], economic growth is going to be pretty low on the other side of it. I’m a seller of any big euphoric rallies based on Europe being resolved imminently," Parker added. "I'm not a real big believer in decoupling" Europe's financial problems from the U.S. economy.

The Sovereign Debt Shoe
If the sovereign debt shoe falls in Europe, the U.S. markets are likely to get slammed. Adam Parker, Morgan Stanley, tells CNBC he doesn't buy the theory of decoupling from Europe.

While U.S. markets seem to be showing strength now he also wonders, in light of DuPont's recent lowered 2011 profit outlook, "whether corporate profitability is going to hold up in the January earnings season. If they don’t you ‘ll get a selloff as we head into the beginning of next year."

That's why the Morgan Stanley strategist continues to be big on defensive sectors including utilities, health care and consumer staples stocks, he said.

He's also big on companies that pay dividends.

"The kind of companies you should own are the dividend yielders. We’re focused on companies that can grow their dividend, are safe and can grow better than the 10-year" Treasury bond," Parker said. "The 10-year doesn’t offer a lot when someone wants to hold it for the duration."

Additional News: Investment Strategy — Buffett Doubts Euro Survival

Additional Views: Getting Defensive with Jim Cramer

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Disclosures:

Disclosure information was not available for Adam Parker or his company.

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