August is a relatively dull month for the stock market. Though pros are searching for short-term moves through year-end, many expect to see the market continue its march higher. The following insights were provided on "Squawk on the Street" on Monday morning.
"This tape has been terribly dull. ... But intraday, it has been a brutal tape to trade," said Ben Willis, managing director at Albert Fried & Co. "The natural instinct for traders is to try and short this market, but rule No. 1 is that you never short a dull tape."
One big topic is the record inflows to U.S. equity funds in July, which have some calling this an "invincible summer" for U.S. stocks. The trend likely started with retail investors, Willis said, with the "hotter money" moving toward technology stocks, particularly microchip producers.
The record flows have been "pretty amazing," said David Seaburg, head of sales and trading at Cowen & Co. "There is still a ton of cash on the sidelines. ... I think it's the beginning of a rotation that we expect to take equities higher."
It has become more of a "stock-specific market," versus a "sector-driven or overall market rally," he said. With improved earnings, market participants—from hedge funds to individual investors—are looking at stocks as "individual entities" and "taking them higher," he said.
Seaburg is encouraged by mergers and acquisition activity as an indication that companies see value in the market, bolstered by the amount of cash held on U.S. balance sheets.
Peter Boockvar, chief market analyst at The Lindsey Group, is a little more tempered in his expectations. The S&P 500 has moved from 1,600 to current highs "without the retail investor," he said. "The market had a tremendous run without the retail investor so I don't use that as a determinant of where the market is going to go from here."
It is more important to understand buyers' "aggressiveness" than the sheer numbers, he said. "If that money comes in but there is an equal amount of sellers, it's not going to really matter," he said. "The only thing that matters this week, the next couple of months and into year-end is what the Fed does."
The market is looking past earnings and economic data to focus on the "free money" that is being pumped into the financial system, Boockvar said. "It comes down to what they do in September, at least for the next couple months."
Joe LaVorgnia, chief U.S. economist at Deutsche Bank, believe moves by the Federal Reserve will "push people into risk assets," as he expects interest rates to remain low, even with a September taper.
However, LaVorgnia expects that interest rates on the 10-year Treasury could move higher, between 2.75 percent and 3 percent by the end of the year, with a step higher in 2013.
The big question for the economy is the sequester, he said, but the impact will likely be moderate, and improvements in housing and personal incomes will contribute to a stronger economy.
"The economy is not great, I admit that point, but I just think people are way too bearish," LaVorgnia said.
One sector that has been hot recently is transportation, which had been a key laggard.
Across transportation, "from a fundamental perspective, we don't really see an inflection point positively or negatively in the data," said Brandon Oglenski, transportation analyst at Barclays. "The rally has a lot more to do about the market than transportation fundamentals."
He sees investors looking for stocks that haven't yet participated proportionately in the rally while offering decent yields and relatively inexpensive valuations. "The transports fit that bill," he said. U.S. and Canadian railroad companies have been leading the charge because of exposure to areas that have been outperforming the broader economy, he added.
Outside rail stocks, FedEx is a name that is a laggard with a cheap multiple, Oglenski said.