Here's what strategists and portfolio managers say is next for the second half of the year and how investors should be prepared.
Nela Richardson, principal and investment strategist at Edward Jones, sees stocks continuing to rally on hopes of an eventual recovery.
"The consensus shows that the pain, the toll, the hurt will be largely felt in the second quarter, and then improving in the third and fourth quarter and seeing some signs of a rebound in 2021 so while we may not know the numbers directionally, what we should see is some consistency – that as the economy reopens, even if it's bumpy, even if there is rising risks with these new outbreaks, that there is some sense that the economy is recovering in the second half of the year, and that earnings will live up to that recovery and stock prices will continue to climb."
Nili Gilbert, co-founder and portfolio manager at Matarin Capital, is rethinking the ways in which her investment team approaches investing.
"If you take a look at the TIPS forward curve, it's currently pricing in that the Fed will not be able to reach their 2% target for the next 10 years, and that inflation expectations right now are lower than they were coming out of the great financial crisis. If we're able to get a vaccine at the end of this year, beginning of next year, and things start to turn around, that starts to look like maybe too aggressive of an assumption, so one thing for investors to start thinking about, and we're talking about on our investment team, too, is dusting off that old rule book and really thinking about -- what does asset allocation look like, what does stock selection look like in a different kind of environment?"
Bob Doll, chief equity strategist at Nuveen, said investors are focused on 2021 and forgiving weakness this year.
"I think the market does not care about second-quarter earnings, we knew they were coming. The question will be how much will the third quarter be up versus the second quarter and to your point, what will 2021 look like? I don't think we could get to above 3,000 on the S&P unless people were focused on next year."