The market is up for the third straight day, but market players Tom Lydon, editor of ETF Trends, and Eugene Profit, chief executive officer of Profit Investment Management, are more cautious about the future, they both told CNBC Thursday.
Retail sales are higher this month, but Lydon points to Mastercard's report todaythat sales of luxury goods are down. "If the wealthy aren't spending, if they're cutting back, we’re not going to get the recovery everyone is looking for," Lydon said.
Lydon is concerned about word on the street that second quarter earnings may disappoint, so he's largely staying on the sidelines. He's making exceptions for isolated investment opportunities he chooses to play through exchange-traded funds.
With corporate bond yields ranging from 6-to-8 percent, Lydon likes SPDR Lehman High Yield Bond Fund. He also likes Currencyshares Japanese Yen Trust , given the 5% rise in the yen over the last month. Another favorite: Mkt Vectors Indonesia, up 17% for the year, the best of any ETF. Indonesia is loaded with natural resources and has a great consumer base, he said.
Profit doesn't believe recent economic data, such as Thursday's releases on jobless claimsor retail salessupport a market rally. The market is rising, he said, from pent-up demand on weak volume. (For a different view see: Stock Rally Reflects Undervalued Market: Strategists).
Still, Profit has some favorites for today's market. One is Medtronic , the medical device maker, which gets 40% of its revenue from overseas. Profit likes this stock not because prospects in Europe seem better, but because the tax being proposed with health care reform doesn’t impact overseas revenue.
"We think there’s a mispricing going on with respect to investors being concerned in the healthcare space about healthcare reform," Profit said.
Other Profit favorites:
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Disclosure information was not available for Tom Lydon and Eugene Profit or their companies.