Despite an optimistic market forecast for the second half of the year, Ally Invest’s Lindsey Bell has a warning for the next few months.
Bell notes that the third quarter is usually the weakest time of the year, with an average increase of 0.7% since 1950.
However, she says there is no reason to be discouraged.
“In the fourth quarter you can usually see the boom,” the company’s chief investment strategist told CNBC’s “Trading Nation” on Wednesday.
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Their forecast assumes the S&P 500 will end the first half of 2021 at all-time highs. So far this year it’s up more than 14%. The index is also on a five-month winning streak.
What could scare the market in the short term? Bell says headline risks related to Federal Reserve policies.
“Investors have been shy. They have generally gotten a little nervous about this issue,” said Bell, a CNBC official. “What we saw is that the Fed’s rate hikes over various periods of time contributed to a high in the stock market.”
However, Bell describes himself as “cautiously optimistic” and expects Wall Street to work off any potential nervousness effectively.
“The stock market peak does not usually come when the Fed begins its rate hike process,” she said. “You shouldn’t worry too much about the Fed picking up anytime soon. But they will likely come next year or the year after.”
For the next six months, Bell prefers to continue using a barbell approach to investing. She wants equal growth weights, including big tech, and economically sensitive stocks.
Bell predicts that earnings per share and GDP growth will continue to rise and support the market in the second half of the year. She also sees a world where technology stocks are getting strong supply amid a slowdown in the economic recovery.
“It could be an area where investors are starting to put their money just because growth is expected to peak in the second quarter,” said Bell.
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