Markets in For 'Some Tough Sledding' by Fall

Stocks wavered on Thursday after a report showed initial claims for unemployment benefits rose unexpectedly for the second straight week. Bruce Kasman, chief US economist at JPMorgan, and Paul Schatz, president at Heritage Capital, shared their insights.

Market & Economic Analysis
Market & Economic Analysis   

“There are trillions of dollars that are fake money from the government,” Schatz told CNBC.

“We wouldn't be here without the government holding us together with Duct tape and Band-Aids.”

Schatz said he is concerned that the US economy will be unable to stand on its own without government help.

“Come the fall, as the Fed begins to pull liquidity, the government continues to raise taxes, the market’s in for some tough sledding,” he said.

But Schatz said he has a 11,500 to 13,000 target on the Dow between Memorial Day and Labor Day.

“We’ve got positions across the high beta* sectors—you have to enjoy the run while it’s here,” he said. “I expect the last leg of the rally into the late spring and summer to be much narrower, have even worse volume and even fewer sectors participate.”

In the meantime, Kasman said he expects the Fed to keep interest rates on hold for the rest of the year.

“For quite a while, we’re going to see commodity prices firm and consumer prices ex-energy quite soft,” he said. “The good news about that is it will keep the Fed on the sidelines as the economic recovery is going to continue to go forward.”

* Beta: Gauge of an investment's volatility. Higher beta = greater probability of the investment fluctuating in relation to a market index.

______________________________
Market Point/Counterpoint:

______________________________
CNBC Data Pages:

______________________________
CNBC Slideshows:

  • Cramer's 12 Stocks to Play the Recovery

______________________________

______________________________
Top Dow Gainers (as of this writing):

Intel

General Electric****

Caterpillar

Cisco Systems

Chevron

______________________________
Disclosures:

No immediate information was available for Kasman or Schatz.

** GE is the parent company of CNBC and CNBC.com.

______________________________

Disclaimer