Economy still strong despite trade war fears: Analysts

Key Points
  • The U.S. economy remains solid with strong earnings, tax reform and deregulation, analysts say.
  • Now is a good time to invest in equity markets.
  • "If you put it all together, things are not all bad, despite the rhetoric that you hear in the marketplace," says Krishna Memani.
Investors should get used to new market volatility says Schawb Investment Management CIO

The market erased its gains for the year after Tuesday's dip, but the economy remains on solid footing, analysts said.

"We are seeing a lot of capital expenditures," Karyn Cavanaugh, senior market strategist at Voya Investment Management, told CNBC. "We are seeing companies going out there and spending more. That's going to increase productivity. And that's good for sustained economic growth."

"It just takes a little bit of time to work through the system," Cavanaugh said on "Power Lunch."

Still, market watchers were on edge Tuesday while the Dow Jones industrial average fell more than 300 points as trade war fears escalated. On Monday, President Donald Trump threatened tariffs on $200 billion of Chinese goods. This is in addition to the $50 billion worth of tariffs already announced. China said it would counter with equivalent tariffs. The S&P 500 and Nasdaq composite also fell as a result.

Market fundamentals, however, are still strong. Omar Aguilar, chief investment officer at Charles Schwab, said the only thing changing is public opinion.

"People are starting to get more anxious," Aguilar said on "Power Lunch," citing other concerns, including upcoming midterm elections.

Given the current strong economic backdrop, including tax reform and deregulation, combined with strong earnings, now could be a good time for investors to get back into equities, Cavanaugh said.

"I see earnings projections for the second quarter of 20 percent growth," Cavanaugh said. "So we're going to have another blowout quarter."

"This trade noise right now, it's still the peas," she said. "It's not the meat and potatoes."

In fact, the U.S. economy will likely continue accelerating in the second half of 2018, said Krishna Memani, chief investment officer at Oppenheimer Funds.

"If you put it all together, things are not all bad, despite the rhetoric that you hear in the marketplace," Memani said on "Power Lunch."

"Whatever pressures we face on the trade side, we're in a much better position to absorb it," he said.