The economic reopening is about to kick in to a higher gear, and market strategists say this — along with the infrastructure package — could be new fuel for stocks. The S & P 500 has galloped about 6% past the average year-end consensus target of market strategists surveyed by CNBC . The consensus average forecast was 4,433, and the broad-market index was down slightly Tuesday after closing at 4,701.70 on Monday. The index is up nearly 25% for the year so far. New life in the economic reopening could help the market gain, as consumers get more confident and corporate profits are holding up. Earnings in the third quarter were up 41.5%, according to Refinitiv. Positive news on fiscal spending sent buyers into infrastructure stocks Monday. PAVE, the Global X U.S. Infrastructure Development ETF, was slightly lower Tuesday morning, after gaining Monday. Further, positive developments on Covid have investors looking at companies that benefit from a reopening economy. Congressional approval of a more than $1 trillion infrastructure plan means new funding for transportation, utilities and broadband. Electric vehicle-charging names such as ChargePoint Holdings and Blink Charging surged by double digits Monday. Both stocks slid Tuesday. Stocks such as Caterpillar, Vulcan Materials and Martin Marietta Materials each jumped several percentage points Monday. All three stocks declined Tuesday. News last Friday that a new Pfizer treatment for Covid could prevent death in high-risk adults was seen as a major development in the battle against the pandemic. Regeneron also said Monday that its monoclonal antibodies protect people from Covid for months. "I had been bullish. Obviously, the news that came out kept me bullish," said Brian Rauscher, Fundstrat's head of global portfolio strategy and asset allocation. He said the Pfizer news could help get more people back to work and that could help break up logistics logjams, helping curb inflation in the process. The power of corporate balance sheets But it's the strength of corporate balance sheets that has made Rauscher confident in the market outlook. "The corporate profit story coming off the bottom has been very supportive and, to me, one of the most important drivers of the market to keep it moving higher," he said. He said he had been expecting to hear more troubling concerns from companies this earnings season but that many companies found ways to work around problems with supply chains and rising costs. "Corporate America is very resilient. The near-death experience they had with the forced shutdown has made these companies stronger," he said. Rauscher said he had been favoring more cyclical names, but in the last several months he has switched to include growth in a more balanced approach. He said he likes some tech. "I do think travel plays and reopening plays should start working again. Those are hotels, airlines and cruise lines ... Things like Live Nation and Booking Holdings , I think they keep going," he said. Rauscher also said stay-at-home stocks could slide but not all of them. He said he still likes Netflix and Walt Disney . Rauscher said Disney could be ripe to buy on weakness if its earnings fail to meet expectations when it reports Wednesday. "If your choice was buying an airline or buying Procter and Kimberly-Clark , buy an airline," he said. A broader way to invest in the reopening Rauscher said he would buy the basket for the airline group and cruise stocks as well because they have so much potential to improve. The U.S. Global Jets ETF represents major airlines, and it was lower Tuesday after gaining on Monday. Its top holdings are United Airlines and American Airlines. "With each day that passes, it's going to be more about stock picking and less about dart throwing," he said. Rauscher said he also likes industrial names but warns investors need to be more selective since not all stocks will come through supply shortages and rising prices the same. "I think they can bounce tactically, but after they bounce tactically, the strong ones will keep going," he said. In the last year, Rauscher said, some stocks were rising on the hope of a vaccine or hope of policy. "There's not a lot of hope things left. They have to operate in the environment we're in," he said. "We don't want companies that don't know how to manage logistics and don't know how to manage their output costs." Reopening stocks could also include medical equipment companies as consumers seek more elective surgeries again. Companies such as Intuitive Surgical , Edwards Lifesciences and Stryker could benefit from that, Rauscher said. "They have been a backdoor play on this reopening." James Paulsen, chief investment strategist at Leuthold, said the Covid drug news and the vaccination of children are positives that have helped put the pandemic in retreat. "It's the final piece of the game change, or close to the final piece," Paulsen said. "I do think it's the end of the pandemic and it's going to be more like a viral endemic, like we have with flu ... We're not quite there," he said. Paulsen also said he sees more room for reopening stocks, such as travel and leisure, to advance. He also said he favors cyclicals and small caps. "Cyclicals on a relevant total return basis to the overall market are cheaper than 91% of the time since 1945, and they are being priced yet today as much closer to the bottom of recessions historically than the bottom of expansions. Small caps also I think are going to be primary beneficiaries," Paulsen said. He said that in a correction small caps and cyclicals might hold up better and probably against rising rate pressure. Some of the ETFs Paulsen favors are the Invesco S & P 500 Equal Weight Materials and Invesco S & P 500 Equal Weight Consumer Discretionary. He also likes international stocks since those markets could benefit from reopening after the U.S. Paulsen said he likes emerging markets, excluding China and frontier markets. The internationally geared ETFs he likes include the iShares Core MSCI Europe .
Traders on the floor of the NYSE, October 28, 2012.
The economic reopening is about to kick in to a higher gear, and market strategists say this — along with the infrastructure package — could be new fuel for stocks.