NEW YORK (TheStreet) -- U.S. equities continue to rally on Friday and Stephen Weiss, founder and managing partner of Short Hills Capital Partners LLC, says small and midcap stocks could outperform in 2015, as the Russell 2000 hit its first new high since July.
Stocks can shrug off higher interest rates in 2015, as global liquidity continues to drive the market higher, he said on CNBC's "Fast Money Halftime" show. He likes financial and healthcare stocks, but acknowledged that the market will decline if the European Central Bank fails to deliver some sort of stimulus in January.
It's not that there's an overwhelming amount of buying in the stock market, there just isn't a whole lot of selling, reasoned Jon Najarian, co-founder of optionmonster.com and trademonster.com. The market may see a small pullback in January, but otherwise, 2015 should be a good year.
Just because the markets are closing 2014 in impressive fashion, doesn't mean 2015 won't be good too, said Jim Lebenthal, president of Lebenthal Asset Management. He believes the S&P 500 will provide a "high single digit return" next year as the U.S. economy continues to gain steam.
U.S. consumers also have more liquidity as lower energy prices are helping to boost disposable income, according to Sarat Sethi, principal, portfolio manager and equity analyst at Douglas C. Lane. He likes consumer discretionary, industrial and technology stocks as a result.
With lower gas prices, lower unemployment, and steady housing prices, the consumer is much stronger, said Dana Telsey, CEO of Telsey Advisory. As a result, retailers are a direct beneficiary of higher consumer spending. Many retailers have "easy" comparable-store sales numbers to top in the first half of 2015, she said, due to last year's polar vortex storm.
Specifically, Telsey looked as some of this year's big winners in retail. She likes Macy's (M) , Foot Locker (FL) , L Brands (LB) , Gap (GPS) and Kate Spade (KATE) . She likes consumer electronics companies like Apple (AAPL) and believes in the turnaround story at Lululemon Athletica (LULU) .
However, she does not find Amazon.com (AMZN) attractive and isn't bullish on the stock going into 2015. The company needs to turn a profit, she reasoned. The increased competition from retailers that are optimizing their omni-channel operations are making it harder for Amazon to keep taking market share.
Amazon is a good company, but the stock is "massively overvalued," said Weiss. It's too hard to buy into a company when its management isn't concerned about generating a profit. He likes Macy's and Kate Spade in retail.
The value just doesn't make sense for investors of Amazon. Once the stock receives a more reasonable valuation, shares will be headed lower, said Sethi.
"It's a great company and a terrible stock," Lebenthal added.
The conversation shifted to interest rates and what investors should expect in 2015. Currently the 10-year Treasury note yields 2.26%.
The 10-year Treasury note doesn't have a very good risk-to-reward, said Weiss. On the downside, rates may drop to 2%, which is good for bondholders. On the downside, rates could climb to 3%, which is bad for bondholders, he reasoned.
I wouldn't short bonds, advised Sethi. Global investors remained concerned about worldwide uncertainty. For that reason, many continue to flock to the U.S. dollar and to U.S. bonds, which will keep some sort of support in the asset.
Lebenthal agreed, saying not to short bonds. Instead, investors should buy short duration municipal bonds.
-- Written by Bret Kenwell