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Halftime Report

Majority of Wall Street pros in CNBC survey say stocks will accelerate gains in the second half, US still best place to be

Key Points
  • A majority of Wall Street pros in a CNBC survey say their overall market view remains optimistic, and more than 65% say they believe equities are correctly valued.
  • More than half of respondents to the “Halftime Report Stock Survey” say they believe the Federal Reserve should cut interest rates at its next meeting at the end of this month.
  • Half of respondents say they expect Q2 earnings to top expectations, and 65% say the United States is still the best place to invest.
  • Tech, financials and health care are top sector picks.

The S&P 500 just posted its best first half in more than two decades, and a majority of Wall Street professionals who responded to a CNBC survey said they think stocks can keep climbing from here.

More than 50% of respondents to the "Halftime Report Stock Survey" said their outlook remains positive, with 65% saying that the U.S. continues to be the most attractive place to invest. The S&P may be at an all-time high, but 66% of respondents said equities are correctly valued, with 15% saying they look cheap.

The survey was sent to strategists, investors and traders, including those who appear on CNBC's "Fast Money Halftime Report." Twenty-six responded to the survey.

Stocks may have closed out the second quarter on a high note — it was the Dow's best June since 1938, the S&P's since 1955 — but the looming threat of a trade war and a global growth slowdown did rock the market. Throughout the quarter the yield on the U.S. 10-year Treasury note moved lower, and gold rallied as investors piled into these traditional safety trades.

But the pros took advantage of uncertainty, with 44% of respondents saying that declining rates prompted them to increase their exposure to equities and take on additional risk. And one area of the market where they continue to find value is in technology stocks.

Tech is the top-performing sector this year after gaining 26% — the sector's best first half since 1998 — and a majority of respondents indicated that they believe the group will continue to lead, with 84% calling it a top pick.

Financials was another popular choice among those surveyed, with 40% saying they favor the sector. Bank stocks gained roughly 7% in the second quarter, outpacing the other 10 S&P sectors. Health care and industrials got 40% and 32% of votes, respectively, with staples, real estate and communication services each getting 16%.

Stocks' stellar June followed an abysmal May, at which point a growing number of investors called for the Federal Reserve to cut interest rates in order to keep the economy growing. At its June meeting the Fed decided to hold rates steady but indicated that a future rate cut isn't out of the question should economic conditions change.

The central bank meets again at the end of the month, and 54% of those surveyed said they believe it should cut rates.

The S&P 500 soared to record highs on Monday following a temporary reprieve in the U.S.-China trade negotiations, as President Donald Trump and Chinese President Xi Jinping agreed to suspend imposing additional tariffs.

But uncertainty continues to surround trade between the world's two largest economies. Talks have now been going on for more than a year, and China has retaliated after the U.S. slapped tariffs on more than $250 billion worth of Chinese imports. Some 46% of survey respondents said that a trade war continues to be the biggest risk in the market, with 38% citing an economic slowdown and 15% geopolitical risk.

Among the strategists surveyed, the U.S. remains the most popular place to invest, followed by emerging markets, which got nearly a third of the vote. The EEM, which is an ETF that tracks emerging economies, gained more than 5% in June for its second-best month of the year.

While strategists remain positive on the outlook for the second half, the number of respondents who said their view had turned neutral or negative was higher than in prior quarters.

A total of 38% said they are neutral, compared with just 30% last quarter, and for the first time some respondents said they are negative.

Additionally, while a majority of those surveyed view declining rates as a buying opportunity, 32% did say that it made them nervous about the overall health of the market, and just under one quarter said it made them want to sit on the sidelines.

— Fred Imbert and Patty Martell contributed reporting.