More than half way through second-quarter earnings season, the third quarter is shaping up fairly well for equity investors, said John Manley, chief equity strategist at Wells Fargo's  (WFC)  Wells Fargo Funds.

"The guidance is rather encouraging," said Manley. "You are seeing signs that things are picking up. The jobs numbers from last week gave me hope that the earnings numbers are going to follow on within a quarter or two."

Stocks are also not excessively expensive at this juncture, according to Manley. On forward consensus earnings, the S&P 500 price to earnings multiple is 17 compared to the 20-year average of 16.5. However, earnings expectations seem to be lifting off especially for mid-caps after a two year stagnation.

"Mid-caps offer the great combination of the liquidity of a large-caps with the efficiency of a small-cap," said Manley.

In terms of sectors, Manley is bullish on healthcare despite the fact that it has lagged thus far in 2016 after a strong prior five years of leadership.

"Healthcare is back to an average valuation after significant correction. Growth prospects still appear strong and election results may be discounted already," said Manley, adding that business-to-business tech should do well as corporations try to offset upward wage pressure with greater worker productivity.

In terms of foreign stocks, Manley said Britain's exit from the European Union will not doom the European economy, which is still open for U.S. investors seeking value. "Both Britain and Germany are the two big players and they both know they are better off trading with each other and getting along then not getting along and I think that finally gets it through," said Manley.

In addition, "emerging markets did not falter as much as developed markets early in the year and this indicates compelling valuation," said Manley.

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