The S&P 500 moved slightly higher Monday as it continued its march toward new highs.
Here’s what four experts are watching now.
Mark Spitznagel, founder of Universa Investments, sees overvaluation as an issue.
“We are in a boom-and-bust cycle. An epic monumental boom-bust cycle … I’m not necessarily saying we have to be on the cusp [of a bust]. Timing these things certainly is impossible. But look, stock market crashes happen as a direct result of overvaluation. I don’t think there are many people around right now that would argue against the fact that markets are quite overvalued. Maybe they’ll get more overvalued. I think that’s the argument for being long today is they could continue their overvaluation and get even more so. But they’re overvalued and this is the setup for left-tail events in stock markets.”
Anthony Woodside, senior trader at Neuberger Berman, sees potential upside in corporate credit.
“When we look at the market here, the opportunities are pervasive in corporate credit still. I know that we had a strong rally in credit. However, we look at the global macroeconomic landscape, and we see an environment where policy yields are at zero across the globe, not just in the U.S. but in developed markets in general, and we think that that creates a very constructive environment for corporate credit. Fiscal policy remains supportive. I know that we have an impasse in Congress currently, but we do expect the constructive environment to continue to be supportive for credit given the pervasiveness of yield scarcity for investors across the globe.”
Stephanie Link, chief investment strategist at Hightower, said this week offers a critical read on the consumer.
“It’s going to be a very busy week. We have one last week of earnings. It’s about 5% of the S&P 500. But the important part of it, it’s really going to be a tell on the consumer. And as we know there are haves and have-nots. The do-it-yourself [retailers] are actually beneficiaries of stay at home so Home Depot and Lowe’s should do well. The problem is the stocks are up so much and they’re not exactly cheap so watching to see the reaction there. The essentials, companies like Walmart and Target, also report. Again, they’ve had nice moves.”
Rebecca Felton, chief risk officer and senior portfolio manager at RiverFront Investment Group, said the technical setup is supportive for markets.
“We believe that the markets can grind high here. A lot of it is based on technicals more than it is fundamentals, although it’s good to see analysts start revising estimates higher as we move through Q2 and the numbers came in above the very low expectations so there is a belief that the economy can recover. Obviously, what’s going on in Washington right now is going to be very critical to that.”