Stocks will continue to move higher and benefit long-term investors, but not without some bumps in the road along the way, the chief economist at Wells Fargo said on Tuesday.
“The market is still trying to figure out that we have growth—we’re certain of that—but now we need to figure out the pace of that growth going forward, so we’re still searching,” John Silvia told CNBC Tuesday.
He added that stocks still have “some way to go,” but that the flux within the markets is to be expected, particularly in the short term.
“When you look at the history of the U.S. economy and the global economy, when the expansion and the growth start kicking in, it’s usually a three- to five-year period, and I think you’ve got a way to go in terms of the equity markets in general. In the short run, there may be a correction, but for a long-term investor, it is very positive,” Silvia said.
Last week saw both U.S. and European markets end the week on highs. The S&P 500 ended Monday’s session at 1,409.75, up around 30 percent from October 2011’s lows.
Some have cautioned against what appears to have been a sudden, sharp rally. Its longevity, especially, has been called into question, as the 1,400 level for the S&P 500 has been breached.
“We’ve had such a move since those October lows, and it seems that volatility has abated. It seems investor confidence has come on strong, but corrections do happen. Historically, 1,400 is a tipping point for the S&P if you look at the past decade,” Tom Lydon, president of global trends investments at ETFTrends.com said.
He said the possible triggers for a correction include inflation, oil problems and the lingering issue of the Greek debt crisis. He also cited general underinvestment, especially in the United States, though he said that trend could reverse itself in the medium term.
“The big concern here in the U.S. is that investors are under-investing, so while there is low volatility, some [investors] fearing being out of the market, we could even see a market melt-up as we go into the summer,” Lydon said.