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Why Markets May Face 'Fairly Major Downdraft'

The Dow inched toward 11,000 Monday as investors cheered some encouraging economic news. Noah Blackstein, portfolio manager at Dynamic Mutual Funds, and John Lekas, chief executive and portfolio manager at Leader Capital, discussed their market outlooks.

“We think the market is not going to sit here and dawdle around,” Lekas told CNBC.

“We think it’s getting ready for a major move, one way or another.”

Lekas called for one of two scenarios: The markets can retrace 100 percent in the near-term, sending the Dow back to the 13,700 to 14,000 levels. Or, there would be a “fairly major downdraft” if the 10-year Treasury yield moves above 4 percent, or if earnings “just meet” expectations. (See Treasury Yields Here)

Lekas said the possibility of the latter scenario happening is greater.

'Expect Some Chop'

In the meantime, Blackstein said he likes the market overall, especially the technology sector.

“You’ve got a couple of risks,” he cautioned, citing the possibility that the Fed could back away from its "extended period of time" language and the upcoming earnings season.

“Earnings will continue to drive us higher, but expect some chop over the next few months for sure,” he said.

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Disclosures:

No immediate information was available for Blackstein or Lekas.

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