The Dow slipped below the 11,000 mark on Tuesday. Should investors continue to be bullish or should they be watching for a pullback? John Merrill, founder and CIO of Tanglewood Wealth Management and Rob Morgan, chief investment strategist at Fulcrum Securities discussed their views.
“We remain bullish—we think this earnings season, by the time it’s over, is going to be supportive of higher stock prices down the road,” Merrill told CNBC. “The bull market has obvious underpinnings like low interest rates, low inflation and amazing productivity over the past year.”
Merrill said the steep rise in asset values has restored net worth to hiring consumers and has encouraged them back towards their normal spending patterns.
“The upper 10 percent of consumers represents over 40 percent of consumption so if they’re back consuming in normal patterns, that’s very beneficial,” he said. “The lower end has been helped extremely by the government programs of unemployment insurance and tax rebates and things so you have both your high end and low end very well-supported.”
In the meantime, Morgan said the economy is in a cycle where consumer spending is "nudging up."
“That’s going to increase demand and there’s got to be more hiring down the road to meet that demand,” he said.
Morgan said he is also bullish on stocks.
“Since the February interim lows this year, the breadth of this market has been very impressive and March, April, May are the best seasonable months for buying stocks and for stocks to move up, so we definitely need to be in that bullish camp right now,” he explained.
Morgan’s Sector Favorites
Technology
Energy
Materials
Morgan’s Sector Underweights
Utilities
Industrials
Consumer Staples
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Disclosures:
Merrill does not personally own shares of CSCO, AAPL, WMT, MCD, JNJ or ABT.
No immediate information was available for Morgan or his firm.
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