Analyst Watch: Top Trades for the Next Six Months

After seven straight days of positive gains, the Dow looked ready to open higher on Thursday after JPMorgan Chasereported a strong second quarter. The bank’s better-than-expected results followed other winning reports like Intel and Alcoa .

The question, of course, is whether or not this good news will continue, and whether investors should feel confident enough to continue buying stocks as we head into the last half of the year. Both Jay Leupp, senior portfolio manager at Grubb & Ellis AGA’s Realty Income Fund (GBEIX), and Harry Clark, founder, president and CEO of Clark Capital Management Group, say yes. They are bullish on the next six months in the market.

For the remainder of 2010, Leupp predicts an upside of 8% to 10% in the Dow, S&P 500 and real estate investment trusts, as the US economy and US commercial real estate begin a slow and steady three- to five-year recovery. He thinks earnings growth primarialy will be driven by cost reductions and modest revenue growth of 1% to 1.5%.

Leupp favores the recession resistant REIT sectors: apartments, self-storage, manufactured home community and stocks, as well as sectors that are early beneficiaries of an economic recovery, such as malls and lodging. His favorite stocks are:

  • Sun Communities, with a 9.4 % Yield
  • Entertainment Properties Trust, with a 6.7% yield
  • EPR Preferred Series D, with a 8.5% yield
  • Glimcher Realty, with a 6.8% yield
  • GRT Series D preferred, with a 9.5% yield
  • Ashford Hospitality AHT Series D Preferred, with a 10.3% Yield.

Clark, too, is bullish, though he expects wide market swings during the summer with intermittent rallies and declines. Though he predicted a good bottom in the fall, somewhere between later September and mid October. That will give rise to the mid-term election rally, he said, which will bring the market to a new high.

There have been 24 midterm elections since 1914, and, according to Clark, the average gain from the low in the midterm election year to the high in the following year has been 49.3% and these gains have been quite consistent over time.

Clark recommended a number of exchange-traded funds to play the move:

  • iShares Dow Jones US Technology
  • PowerShares QQQ
  • First Trust Dow Jones Internet Index
  • Market Vectors Steel ETF
  • Market Vectors Agribusiness ETF
  • Health Care Select Sector SPDR
  • iShares Dow Jones US Medical Devices
  • iShares Dow Jones US Pharmaceuticals

He also said that he likes the emerging markers and endorsed the iShares MSCI Brazil Index, Market Vectors Brazil Small-Cap ETF, WisdomTree India Earnings, iShares MSCI Malaysia Index and iShares MSCI Singapore Index.

Clark had been avoiding Europe but just took small positions in Spain and Italy. And he said he’s still long the US dollar and Australian dollar.

-The Associated Press contributed to this report.

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Disclosure: All of the stocks that Leupp recommended are owned in at least one of his firm's three mutual funds - GBEIX, GBEUX or GBEWX. The company does not own 1.0% or more of any of these companies, and he is not permitted to own any of these companies personally. He does own shares in all three of the mutual funds.