Bob Doll, Crossmark Global Investments' CEO and chief investment officer, describes himself as "cautiously optimistic" about the stock market while noting that equities are pricey.
"We remain mildly constructive about the equity market outlook, given the supportive macro and earnings outlook but
stress that a lot of good news is already discounted and stocks are historically expensive," he said in his weekly commentary Monday.
"Continue to favor equities over bonds in a multi-asset portfolio, given our forecast of an ongoing global economic expansion and supportive monetary and fiscal policies," he suggested. "However, returns on portfolios are likely to be moderate rather than robust over the next six to 12 months, accompanied by above-average volatility."
The S&P 500 and Nasdaq recorded their fifth straight weekly gains last week, Doll noted, again ending at fresh closing highs.
"The week reinforced a resilient economy and earnings backdrop, despite no real progress in the Middle East stalemate," he said.
Doll added that communication services and energy performed the best while materials was the sole declining sector.
Higher gas prices will eat about half of the $150 billion tax windfall that households will enjoy this year, and most companies acknowledge the Middle East war as a major source of uncertainty, Doll wrote. Most, however, report that they hadn't seen significant material hits to demand, credit quality or consumer behavior in the first quarter, he added.
Despite geopolitical uncertainty, strong earnings have driven stocks higher, Doll noted. Ten of the largest tech companies account for 70% of the S&P 500 gain since the March 30 market bottom, according to the CIO. He noted that companies' estimated value beyond the next 10 years accounts for 75% of the current S&P 500 — near a 25-year high.
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