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Dow nets its best monthly performance since 1987 — three market analysts on what's next

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Dow could see its best monthly performance since 1987 — Three experts on what's next

Stocks fell sharply on Monday as investors cashed out of their November gains.

Even with that sell-off, the Dow Jones Industrial Average closed its best month since January 1987.

Here's what stocks could look like in the next few months, according to three market experts.

Liz Young, director of market strategy at BNY Mellon Investment Management, said any pullback would be a buying opportunity.

"We have pulled a lot forward and there's a little bit of a risk through the end of the year that we have some of that steam kind of come off. It could come off in some of the economic data, it could come off in the market, but I think that this is something that investors can and should look through. If we have a little bit of a wobble, we'll call it 3% to 7% -- anything that could happen before the end of the year -- I would see that as a buying opportunity and you really have to look out three to six months and think to yourself, 'Are things going to be better than they are today?' And I think the answer to that is 'yes.' … Once we get into 2021, the expectations are going to go up. I would expect that more companies start to give guidance as they should, particularly in the second quarter, so I think timing is the key factor here. The fourth quarter, getting to the end of the fourth quarter, is probably going to be a little bumpy. First quarter we probably have some lingering effects, not only here but especially in Europe from shutdowns, from increases in cases and just winter in general. But once we get into the second quarter of next year, I would expect more clarity from companies. I would expect more focus on fundamentals from stocks, particularly in the U.S., and I'd expect a pretty healthy recovery, both in the market and in the economy starting abroad."

Jimmy Dunne, senior managing principal at Piper Sandler, said a coronavirus vaccine is a big step forward for the market.

"I'm actually optimistic. I think that if you look at where we are, we're going to get a vaccine reasonably soon. Exactly who takes it, doesn't take it, I mean everybody I know is going to take it, and I think that's a real positive. I think we're a long way from where we were in March. … Now we've got a question about [whether] we're going to get a recovery. The two issues will be what are the real ramifications from credit, are the banks overreserved? They're in a much better position than they've ever been in terms of other crises. They have more capital. They've been aggressive with their reserves"

Mohamed El-Erian, chief economic advisor at Allianz, said the next market mover could be Federal Reserve Chair Jerome Powell's testimony this week.

"We've priced most of the vaccine news in because we've had so much. I think we're going to look very carefully as to what Chairman Powell says this week. There's a lot of expectations after the Fed minutes. So that's the next big event. What does Powell say on Tuesday and Wednesday? The markets right now are driven by three things – one is the vaccine and therefore economic recovery; two is continued central bank support; and three is continued investor conditioning with more money coming in. So we are going to, again, put aside all these other things. They're not going to have much of a market impact."

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