Stocks rallied for a third day in a row Monday after the most volatile bout of trading in the history of the U.S. stock market. The Standard & Poor's 500 Index had its best three-day rally since 2009, up 7.5%, while the Dow Jones Industrial Average climbed 314 points or 1.9%. But Tuesday's weak economic data from Europe will test this recent rally.
Many skeptics see this calming as a precursor to a wicked storm ahead, and stocks were heading lower Tuesday morning. But Marc Pado, U.S. market strategist at Cantor Fitzgerald, believes the markets have seen the low as is indicative of last week's "classic selling climax" and "indiscriminate selling" as investors fled to safety, which is typical for hitting rock bottom.
"We got that all-out panic reading that you get at the bottom of a market," he says while comparing the recent market volatility with the lows of 2009 when the VIX, or volatility index, hit 48 just like it did last week.
So where do we go from here?
Pado says up. On June 23 he predicted Yahoo! Finance's Breakout the S&P was headed to 1450 by year-end. His view has not changed much because, despite the political risk Washington now poses on the markets, companies have never been in better shape. "Their balance sheets are clean. They have very little debt. They have tremendous amounts of cash," he tells The Daily Ticker's Aaron Task in the accompanying interview.
To top that off, even if the economy were to slow to a halt, S&P 500 earnings are on track for $92, which is equivalent of a P/E of 12.8 times projected earnings, the lowest since the 1987 crash.
If you're investor looking for areas of opportunities, you're in luck. Pado says all categories will benefit. For the more cautious individual, he recommends blue chips stocks that pay dividends, like pharmaceuticals. For the less risk adverse investor, he recommends large-cap tech stocks, like Apple, which have a ton of cash on hand.