Wang said the low inflation environment is also supporting the economy and the stock market.
FRED KATAYAMA: Stocks on Wall Street gaining on vaccine hopes Wednesday, the first trading day of the third quarter.
Let's get an outlook for stocks on this quarter. We're joined by Andy Wong of Runningmede Capital Management. Welcome back, Andy.
Now, sure, we got strong ISM data today and vaccine hopes on Pfizer's drug development, but COVID-19 cases surged yet again to a record. Why did investors and are investors justified in just brushing off the coronavirus cases that keep increasing?
ANDY WONG: That's the question that clients and all investors alike have been asking all year long, it seems, certainly for the last three months. And we feel that it's really this low inflation environment, tons of liquidity from both fiscal and monetary stimulus that's allowing the economy to slowly recover but with a greater disparity between the winners and losers. Every day we see the stock market being surprisingly resilient.
But if we just look at a few indices, I think that it's interesting. Tech continues to outperform. The NASDAQ is up 14% year to date. And on the other side of that, you have the Russell 2000 is down near 15%.
So, really, the indices being driven by five big stocks. Apple, Microsoft, Amazon, Google, and Facebook really making up a significant part of those indices.
FRED KATAYAMA: Well, what do you-- what's your outlook for stocks in the third quarter, Andy? The NASDAQ, which you mentioned earlier, is up 31% in the last quarter. The S&P 500 not too bad either at a whopping 18%. How much more can we get in the third quarter when people are expecting an economic recovery?
ANDY WONG: Well, it's challenging looking at economic data and really trying to be a fundamentals-driven investor because a lot of those numbers remain either not very visible and not very good.
On the flip side of that, as I said, I think it's the liquidity. It's the stimulus. The Fed has done an amazing job on stepping in and taking emergency measures. I mean, if we compare it to the financial crisis back in 2008, they increased their balance sheet in about six years, and they've done an equivalent amount in the last three months. So the size and the scope has been really epic.
And I think that, you know, we remain concerned. I think there's a fairly high-risk market that we are looking at, but liquidity has been ruling the day. So the possibility for having higher prices is very possible.
FRED KATAYAMA: Even as we go into the fall, which is when it's [INAUDIBLE].
ANDY WONG: Even going into the fall.
FRED KATAYAMA: All right. Well, how should investors position themselves ahead of the Q2 earnings results that come out in two weeks' time?
ANDY WONG: Very good question. We look at earnings pretty closely. We still feel that earnings do matter, and investors should look at companies and strive to own companies that have earnings and an underpinning of positive fundamentals.
So if we look at the S&P 500, you know, earnings are likely to be difficult through Q3 and Q4. And, really, it's not until Q3 of next year that earnings are expected to recover to the levels of 2019.
So I think that it's important to note that there is an expected rebound of earnings. I think that the S&P-forecasted estimates, they are really expecting a V-shaped recovery. And the likelihood of having some choppiness there-- some of those numbers are looking a little strong right now.
FRED KATAYAMA: All right. OK, thanks, Andy, for those thoughts.
ANDY WONG: Thank you, Fred.
FRED KATAYAMA: Our thanks to-- our thanks-- thank you. Our thanks to Andy Wong of Runnymede Capital. I'm Fred Katayama in New York. This is Reuters.