The market had a rough go of it last week, but all things considered it could have been worse.
Former FBI Director James Comey's testimony before Congress had a capacity to throw the White House into turmoil and hammer the market, but it didn't. UK voters' rebuke of Prime Minister Theresa May also could have crushed stocks, but it didn't.
Investors instead are focusing on fundamentals, and so far like what they've seen. However, if corporate earnings don't keep pace, or the economy keeps lagging, or tech stocks get bubbly, that could start making the market look even more expensive. And if anything is keeping market pros up at night, it's that question of valuation.
David Bianco, chief investment strategist for the Americas at Deutsche Bank, has this week's words of wisdom about where stocks are heading. He is recommending investors scale back their stock exposure heading into the summer, with a sector preference for health care and large pharma and biotech companies:
The S&P often achieves a high in spring, but in summer it often consolidates as investors re-examine their views and valuations and prepare for their desired positioning into year-end. September-October is usually a make or break time for the market. If the risk-reward appears attractive into year-end markets usually rally from a summer or early autumn dip into year-end...
Fundamentally, we still see healthy returns from the S&P 500 over the next several years, thus this near term pullback should offer a good entry point, so we're patient and selective for now.