I don't want to short stocks when gross margins are going up, says Trivariate's Adam Parker

where to position for another leg higher in stocks let's ask Adam Parker Tri variat founder and CEO and a CNBC contributor with me once again at Post 9 good to see you welcome back great to see you uh you feel pretty good about where this Market is I mean the momentum seems kind of clear and obvious at this point right yeah yeah it does I think most of the people I talked to are just worried about a rotation whether it's the inauguration in late January whether it's a gen one or could somehow creep into the

second half December but a rotation what do you mean just kind of a switch switch of leadership you know kind of a new new winner new loser I mean look all of us can say there's stocks that are up a lot that maybe shouldn't be there's stocks that are up a lot that maybe I I I can kind of see why they are and then same thing there's some that are down a lot you're like really I'm not sure they should be down and then others that are down you know Foot Locker like are you

sure physical retailers of course they should be down Target you've been NE you've been negative you know physical retailers for as long as we've been having these these conversations yeah yeah that that that like we like Amazon and Walmart we don't like physical retailers call yeah it's obvious but over time it just keeps working and I think it's you know Target's been a really bad stock for several years coals dollars other I I I think they're still in trouble do you do you think we're in the early stages of a prolonged bull market prolonged even

further by the election of Donald Trump no I don't think so I mean we've been in bull market for a long time already right two years um yeah yeah two two and change yeah well two sl5 depending if you take Co out right I mean you know whatever it's been it's well I mean you had the the rate hikes so I think the biggest risk and I think the bull probability is still higher than the bear I still think it makes sense to you know keep risk on but the biggest negatives I see are there's

no question the FED path looks less accommodative than it did a few months ago right like you could get a strong jobs report later this week and they could have a hawkish set of commentary and I think 3 months ago everyone's like oh 8 10 cuts are coming we're not getting that many Cuts but like the Fed chare was just talking with at dealbook I don't know if if you had a chance to check out the conversation you're making your way down to visit with us um he said economy remarkably good shape stronger than we

thought it would be in September labor markets better downside risks appear to be less inflation coming in a little higher and therefore he addressed where he thinks policy can be let's just listen to the FED here because he doesn't do this that often and I thought his comments were pretty interesting the economy is strong and it's stronger than we thought it was going to be in September so the labor market is is better and the downside risks appear to be less in the labor market growth is definitely stronger than we thought and inflation has coming

a little higher so the good news is that we we can afford to be a little more cautious in as we as we try to find neutral I mean the takea away from that is in other words we're in no rush right we're in no rush to cut but we know cuts are coming right and then he when he overlays the fact that the economy is in remarkably good shape stronger than we thought labor Market's better inflation but are you asking me to articulate what the bare case is or what my view is right in

other words I think the bare case would be the FED we want to we want to we don't want to fight the FED until we think they're halfway or two-thirds of the way done and then we got to say hey look last cycle we we got bullish even know where they were still hiking because we saw it was close to the end so if that same logic applies on the other side you could say well once we're 2third of the way done I got to say there's a little less in front of me and I

could see people saying hey I that's closer we're closer to the end of the accommodation cycle than I thought that'd be one risk if inflation's running hotter we talk about it all the time but the number one thing that matters to stocks in my opinion is gross margins go up and a lot of companies particularly smaller ones can't handle Rising CPI it's bad for their margin so that's the mega cap trade the only last thing I'd see that's a little inconsistent to what poell said is the 10e yield the last couple of weeks right where

if growth's good and 10e yield backs up to 47 and now grow good and it backs up you know we're going to 4.1 like which one is it you know so I think the Market's up today um be you know because growth is good that that's think grow good but grow being good doesn't mean that yields have to back up again why does it mean that well I you can't both be bull it doesn't but you can't both be bullish that the fed's accommodative and bullish that they're not accommodative like it's at some point that

fed but they are accommodative even if they're not as accommodative as we once thought they they might be but they don't have to be because you balance that out with a stronger economy the the things I'm worried about and I still think the bll argument in control the things I'm worried about the fed is closer being done than I thought 3 six months ago okay on the front end and if CPI picks up and we get a little bit more inflation that's not great for margins for a lot of companies I think the bull case

that I didn't know about three months ago is uh that the president of the United States one of the things that that the incoming president cares about is the stock market and so he's going to create some volatility and do some things that change things and if anything makes the stock market go down 10% he's going to stop doing that right so it feels like you got a down 10 up 30 kind of guy from the top he can't control everything but he certainly can you know um you know uh sort of ask for policy

and and and the like well I mean you you lead into what some say is a trump put plus a fed put yeah plus a strong economy isn't that you know yeah that that's the C plus b plus that's why the bull that's why the bull case is still in control I think over the bear but the bear the bear case is definitely and you you have a lot of people on this show you know where they were bearish one and two years ago and they're bullish now so the sentiment is not as negative right

that happens and for good reason though right I guess I mean the year ahead outlooks from all the big firms are bullish this year they were bearish the last two years so the sentiment the contrarian sentiment thing is you can't romanticize your contrarian bull anymore like you could a couple years ago and and that that's probably where I feel like the bearish argument is the bull argument is I think G the economy is pretty good what pal said I think high level is right uh and um and you know I think earnings will grow and

so you don't want to be I don't want to short stocks where gross margins are going up period