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Why stocks set up nicely for 2nd half: Strategists

Markets are looking through economic weakness, soft earnings and other worries toward economic rebound in the second half of the year, strategists said Wednesday.

This year has "flipped the playbook" from last year, said Jon Mackay, Morgan Stanley Wealth's senior markets strategist. While 2014 saw U.S. stocks rising as the dollar strengthened and oil prices plummeted, the greenback has weakened lately and crude has clawed back some of its losses.

"The dollar falling was a good thing for U.S. equities, and I think they were able to look past [a] weak first quarter to better earnings growth in second half of this year and better economic growth as well," Mackay said on CNBC's "Squawk Box."

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U.S. markets have hit fresh all-time highs this week. The Dow Jones industrial average on Tuesday notched its sixth record close for 2015, while the S&P 500 touched a new intraday peak.

Morgan Stanley is expecting equity markets to return 7 to 8 percent this year, with dividends and share buybacks delivering 2 percent each, and earnings growth up 4 percent, Mackay said.

The Federal Reserve's anticipated interest rate hike itself is not enough to create significant upside or downside risk for markets, he added. Instead, Mackay sees it as another tightening move in a bigger cycle, saying the tapering of the central bank's quantitative easing program between January and October 2014 amounted to tightening.

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However, he said higher rates will benefit American savers, who have been getting negligible returns because the Fed has held its benchmark interest rate near zero since December, 2008.

The Federal Reserve is widely expected to begin raising interest rates in 25 basis point increments later this year or early in 2016.

"No one's running a victory lap over 25 bips, but the implication is that 25 turns into 50, 75, 100," Mackay said. "We've got an aging population, so people that rely very heavily on bonds as income, also getting nothing, are finally seeing some light at the end of the tunnel."

Julian Emanuel, director of U.S. equity and derivatives strategy at UBS, said the memory of the recession lingers with Americans, but he expects the consumer to rebound as jobs growth and gas prices remain reasonable.

"In the past, this has usually happened nine to 12 months after the oil price first starts to fall, and we're right at that sweet spot, just when economists have more or less given up a lot of hope that it's going to happen. So that's a potential upside surprise for markets," he said.

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