Stocks are starting the second half strong.
Here's what three market watchers said they'd still keep their eyes on as market conditions appear to improve:
Christopher Ailman, chief investment officer at CalSTRS, said he'd generally stay away from stocks in the second half:
"It has been the most challenging first half of the year I have ever seen, just utterly absurd. And the stock market's really given us a V, yet the real economy seems to be in a sloppy U or a W pattern. … We're going to be underweight equities going into the second half of the year, but not substantially, because that rise in … April, May and June really hurt if you were underweight."
Jurrien Timmer, director of global macro at Fidelity Investments, was watching Wall Street's earnings estimates:
"Usually, earnings estimates fall right into the end of the quarter and then they start rallying when earnings season gets underway, but we've seen, like I said, this very sort of flat line in estimates. And that could mean that they're too high, but it also could mean that they're too low. It just means, with little guidance, that analysts don't really have any information to update their numbers. And so, if you look at the market, the market's down 10% from the peak. The 2022 earnings estimates — so, that's two years from now — I think is what the market is trading off of. That estimate is down about 15% from the high. And if that turns out to be too conservative because we're having a V-shaped recovery, which some of the economic numbers are actually supporting, then I think that will be the fuel for the next advance in this market."
Steven Wieting, chief investment strategist and chief economist at Citi Private Bank, forecast what a possible rebound could look like:
"The coronavirus is, right now, accelerating in the Americas, not the rest of the world. Again, so, that's Latin America and parts of the United States … and that can slow us down. But as we look at daily data — we look at employment, credit card use, mobility, all of these things — it's unlikely that we're going to get a shock as severe as what we saw in the March-April period. We're going to get sustained monetary and fiscal stimulus. I think the rebound will be slower and choppier than the collapse, but we are in this, again, for a multiyear recovery, and I think our portfolios are going to look very, very different. The shares that had led in the past 12 months, those that have benefited, in fact, from Covid, I don't see any negative catalysts for these big growth stocks, for digitization and IT shares. But many of the industrials, the materials, the real estate, all of these things are fundamentally beaten down right now, but in 12 months, they'll be less so."