After more than three years of bullishness, one pro at Morgan Stanley said he is balancing his market outlook for the second half of this year.
Morgan Stanley has a 12-month target of 2,050 for the S&P 500, said Adam Parker, U.S. equity strategist at Morgan Stanley. The index traded above 2,090 midday Wednesday.
"I don't think the earnings trajectory is going to accelerate much beyond kind of low-to-mid singles [digits] in the U.S.," Parker told CNBC's "Fast Money: Halftime Report" on Wednesday.
With bonds, financials, technology companies and biotech stocks all facing challenges, Parker said utilities have been working. The S&P 500 utilities sector has popped more than 24 percent in the past year, compared to a just-over 1 percent change in the overall S&P 500.
"I think there's something to be said, despite absolute valuations looking high, for continuing to own yielding instruments, which compared to government bonds are going to continue to look quite compelling," Parker said.
In contrast, Morgan Stanley recently got more cautious on financials, despite growth in shareholder return, limited currency exposure and compelling valuations, he said.
"It's just too hard to separate that sector interest rate environment," Parker said. "If the the 10-year is going to go the way of the bund and [Japanese government bond], it's hard for these stocks to .... really earn high returns."
The Federal Reserve has held back on raising interest rates as international politics have impacted financial markets across the globe. Meanwhile, German bond yields dipped into negative territory last month, following Japan's February slide.
Even technology and biotechnology companies aren't the haven of growth that they used to be, Parker said. A fund that tracks Nasdaq's biotechnology companies has fallen nearly 29 percent over the past year as politicians took aim at high drug prices. At the same time, a fund that tracks technology companies is nearly flat over the past year, despite its reputation as a high-growth sector.
"That portion of the market has not regained its glory yet," Parker said.