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Will the Market Rally Last?

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The market rally seen in recent sessions could be short lived as many downside risks remain, Gemma Godfrey, head of investment strategy at Brooks Macdonald Asset Management told CNBC Friday.

“There are signs of nervousness and that is down to the fact that this rally is on low volumes and the flows that are coming in, and there might be a correction,” Godfrey said.

She added that the rally was fragile and if any negative data were released or another issue regarding the euro zone crisis were to flare up, it would be derailed.

“Within the growth story the downside risks include the fact that while job numbers look good. There isn’t any wage growth and the consumer is under downside pressure. The focus has also gone to the fears of inflation,” Godfrey said.

The S&P 500 rose to a 52-week high on Thursday, breaking the 1,400 points barrier for the first time since June 2008, before the financial crisis.

Others felt the rally was just the beginning of a more sustained upward trend for the markets.

Jack Bouroudjian, CEO of bull and bear partners, was more optimistic, arguing that growth in the United States was underpinning the rally.

“This is a broad-based rally. This is capital that has been parked and now is coming in waves and I would expect a little of this to continue. A lot of portfolio managers are starting to play catch-up, that have been sitting on the sidelines and are still non-believers of this rally,” Bouroudjian said.

He added that the broadly positive stress tests for U.S. banks earlier in the week and the reduced likelihood of contagion from Europe were all bullish factors.

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