Nick Colas on June S&P 500 projections
It has been a bumpy May for stocks.
The S&P 500 posted a gain of nearly 1% for the month, although sales of high-tech and growth stocks resulted in a volatile period.
Nick Colas, co-founder of DataTrek Research, says it all comes down to profits.
“The funny thing about this year is we’ve seen more earnings revisions than we’ve seen stock price performance,” Colas told CNBC’s “ETF Edge” Monday. “We have seen a 12% increase in earnings forecasts this year… This will come down to Q2 and Q3 earnings.”
Analysts polled by FactSet currently expect second-quarter S&P 500 earnings to rise about 60% from a depressed pandemic quarter this time last year. The big banks will kick off the season with their report in mid-July.
“The numbers are still too low, it seems to us, for the second quarter, so we should have another strong season of results ahead, but it will be kind of tug-of-war by then,” said declared Colas.
Prepare for more volatility until the second quarter earnings season in mid-July gives the markets some direction, he adds.
“Expect a few more weeks of what you just saw and then, as the benefits start to kick in, another higher leg towards the end of the year,” he said.
Any progress towards an infrastructure bill should also boost investor sentiment, according to Jay Jacobs, senior vice president and head of research and strategy at Global X ETFs. His company’s PAVE infrastructure development ETF was launched during the 2016 presidential election cycle, and he now sees even more appetite for activity in this area.
“It’s sort of ripe for disruption, if you will, with an economy that’s still below mainstream GDP,” Jacobs said in the same interview. “Investors are very excited about the prospects for the biggest infrastructure bill we’ve ever had in the United States and a fund really designed to hold the winners of this type of bill – engineering companies from construction, raw materials, transport companies and heavy machinery companies that will build this infrastructure. “
The way forward for an infrastructure bill is still unclear. Senate Majority Leader Chuck Schumer said on Friday Democrats would work with or without Republicans on a plan in June. The two parties are divided on the overall cost of a proposal.