He said that inflation could flare up again.
“I think we could be looking at a contained situation,” Stovall said. “I think with a combination of earnings deceleration combined with higher interest rates -- we’re forecasting the ten-year note to close the year at 5.25% -- and general concerns about growth in the economy being a little bit stronger, we could end up seeing an acceleration in inflation.”
Russ Koesterich, head of investment strategy at Barclays Global Investors, said there may be some short-term volatility ahead, but he thinks the market can go higher.
“I think the key for the market right now is the ability to digest the fact that the ten-year [bond] has moved out of the 4.5% to 5% range that we’ve all enjoyed, and probably into a range of 5% to 5.5%,” Koesterich said.
“I think that adjustment will take some time," he added. "The summer could have some volatility -- maybe a modest pullback. I think if inflation continues to decelerate, which is the pattern we’ve seen in the core CPI, you could have a decent fourth quarter and put on some additional gains from here.”