NEW YORK (TheStreet) -- Markets are at risk of a near-term pullback before stronger second-half gains are made amid better economic data and earnings.
That's the assessment from fund managers, after a sideways slide in stocks this year painted a sharp contrast to the rally of 2013.
The S&P 500 has gained just more than 3% this year, as markets take a breather after the rise in valuations while last year's outperformers -- small caps, biotechs, new media and consumer discretionary -- are sold off for less expensive sectors.
"The first half has been about digesting last year's gains and now further gains will be driven by earnings and economic news," Warren Financial chief investment officer, Randy Warren, said in a phone interview.
Chase Investment Counsel chief investment officer, Edward Painvin, suggested the sideways slide could continue over the summer months, and sees no indicators of a sharp move either way in markets.
"Second-quarter earnings in July will be very important," he said, noting many companies had forecast stronger earnings in the second half.
The ongoing unwind of Federal Reserve bond purchases, which has fueled demand for equities, will make stocks more sensitive to fundamentals, fund managers said.
RockWell Global Capital chief market economist Peter Cardillo pointed to a 14-month low in the VIX -- a key indicator of market volatility -- as a sign investors may be too complacent over geopolitical risks. If any eventuate, markets could be shaken near-term, he warned.
"Volume is also not great, but any pullback shouldn't be too serious," he said. In the medium-term, Cardillo said he expects better economic data to support new market highs over the summer to around the 2000-range.