U.S. stocks have benefited from being in a “sweet spot” the past few weeks as economic data has improved while interest rates have remained low. The bulls better enjoy it while they can, because it may not last much longer. “It’s hard to see stocks go much higher without an improvement in fundamentals, especially since it seems that a September rate hike is a real possibility, said Kristina Hooper, U.S. investment strategist at Allianz . In Hooper’s view, central banks have created a “moral hazard” situation where market participants feel they can take risks because the central bank will always step in to make things right. She believes that so-called “put” continues to alter markets and could end up hurting investors in the end. “Brexit is not over,” said Hooper. “We will continue to experience episodes of volatility globally – centered in Europe – created by uncertainty.” Hooper expects to see increased volatility related to the presidential election. She is reminding investors that the Brexit vote is a “cautionary tale because polls lie – because people lie”. That said, Hooper does not see the U.S. economy nosediving anytime soon. She expects economic growth to slowly improve this year, forecasting GDP growth at 2.2% in Q2 and 2.6% for Q3. And she said second quarter earnings season has been shaping up well so far, especially with the Street-beating results from the financial sector. Banks have been the laggards thus far in 2016, while utilities, energy and consumer staples have led the way. Hooper said finding yield will continue to be a theme throughout the rest of the year considering the low-yield environment. Nevertheless, she said technology and healthcare are “screening nicely” and could make a comeback.
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