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Stocks continue to climb on recovery optimism — Cramer and four others on what's next

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Markets continue to climb on coronavirus recovery optimism—Five experts explain the rally

Stocks continued their climb on Monday on optimism over a recovering economy.

Here are five experts on what's behind the rally.

Mohamed El-Erian, chief economic advisor at Allianz, sees a win-win scenario for markets. 

"[The May jobs report] was perhaps the most shocking positive surprise for markets, and the biggest miss for economists, so you have to look into that. The complication is you have not two, but three factors we've been talking about today. One is — is it reflecting the economy picking up quickly? Two is — is there something about the data? But there's a third one — the impact of government policy. So both policymakers and economists are continuing to scratch their head, and they're going to have to err on one side or the other of an uncertain balance. Markets are completely different — it confirms a win-win. And this win-win hypothesis — I win if it's a recovery, and I'm still winning if it's not because policymakers will do more — has powered this market in a really impressive way and will continue to do so."

Stanley Druckenmiller, well-known hedge-fund manager, is getting exposed to value stocks. 

"There are a very limited number of large cap but very large cap companies that benefit from Covid, and there are hundreds of companies that get hurt by Covid. That's why the first 35% of the rally was led by the growth of stocks, and now it's being led by, obviously the last few weeks, value stocks… I have the least growth leaning in my portfolio [than] I've had for maybe six or seven years."

Jim Cramer, host of CNBC's "Mad Money," says investors are riding the V-shaped rally. 

"This is one of those rallies that not only has taken people by surprise but continues to roll, and we're seeing major gap-ups. ... We're seeing major gap-ups in the morning — highly unusual. 1980s action ... We've got some incredible breadth. We have a Fed that is completely on the side of the bulls. We have a president who wants new highs. We have stocks that are recovering well ahead of the fundamentals, but some people could say, "That's what should happen." ... It's almost as if people decided Covid is over. It's a V-shaped rally. And you better get on board."

Jonathan Golub, U.S. equity strategist at Credit Suisse, says the comparisons are favorable for the market. 

"All of what I would call the sequential data, the stuff that's coming out — let's say the jobs report versus the last jobs report, or the miles driven or retail sales and comparing it to what happened last — they're going to look off-the-charts great and you're going to see improvement everywhere. And I think that that's going to give a near-term additional boost. The reality, though, is you have to ask a different question. With over 20 million people less employed now than there were before, how long will it take to get back to those numbers? The V off the bottom is going to be easy, it's going to be exciting. But, it's probably too soon to even address those issues about how long it will take."

Jack Ablin, founding partner and CIO of Cresset Capital, says valuation is not yet a concern. 

"We looked at three different valuation measures. I think the one thing your viewers should also disregard is anything related to forward earnings — so forward PEs or anything like that. But if you look at the ... equity markets related to the economy, you look at EBITDA to enterprise value, you look at the CAPE ratio, generally, we are above median, but we're certainly not in a bubble territory. I wouldn't call it a dangerous valuation — certainly fully valued, and one that certainly can sustain itself as long as we get continued improvement in the economy."

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