NEW YORK ( TheStreet) -- Wall Street and corporate America are continuing to execute even though the economy is growing at a subpar pace, said Alan Gayle, Senior Investment Strategist for RidgeWorth Investments.
"Companies have managed to adjust expectations and they are stepping over a low bar," said Gayle of second quarter earnings season so far.
Gayle said he was encouraged by the steady progress in the U.S. consumer, reflected in continued job and income gains, strong auto sales and increased housing activity. He added that labor market slack appears to be abating, wages have improved and confidence is higher.
Regarding the volatility in China and its potential impact on the U.S. stock market and economy, Gayle said China is basically "trying to rebuild the airplane while it is in-flight."
"They are trying to reorient it from being an export-led economy to a consumption-led economy and what happens is that the destructive end of that tends to come first," said Gayle. "That's putting a lot of downward pressure on commodity prices, but to a great extent a lot of that is benefit of the U.S. consumer."
Gayle said he is currently keeping his allocation to commodities low despite the lower valuations. He said he will likely raise his allocation to energy and mining stocks once demand returns in full.
On the other hand, he said financial stocks, which generally posted strong second quarter earnings results, have "decent upside" due to potentially higher interest rates.
"We see loan demand starting to pick up, loan quality is solid and we are starting to see an increase in interest rates," said Gayle. "All those factors are going to argue for a further appreciation in financials."
Finally, Gayle said the high yield space still offers value and the recent downturn over liquidity concerns is "more of a signal to get in than get out."