Stocks had a great first half despite D.C. drama

How CNNMoney's Fear & Greed Index works
How CNNMoney's Fear & Greed Index works

The first half of the year has come to a close. And despite all the drama in Washington, and lack of any significant progress from the White House and Congress to get anything major done to help the economy, Wall Street is still in rally mode.

The Dow and S&P 500 have gained more than 8%. The Nasdaq has soared 14%. These are good returns for a full year, let alone six months. The rally has been broad too. 23 of the Dow 30 stocks are higher and 70% of the companies in the S&P 500 are up.

But what can we expect from the market over the next six months?

The Dow finished Friday with a more than 60 point gain, but that snapped a three day streak of triple-digit moves.

Still, volatility has recently returned -- with a vengeance. Markets have alternated between gains and losses. Stocks plunged Tuesday and Thursday but surged Wednesday.

CNNMoney's Fear & Greed Index, which looks at seven indicators of market sentiment, hit both "fear" and "greed" levels this week. The VIX (VIX), a volatility gauge that is one of the components of our index, spiked as much as 40% Thursday before pulling back.

So investors may need to brace for more big swings -- up and down -- in the months ahead.

Wall Street will be focused on whether or not corporate earnings can continue to rise at a healthy clip in spite of what's going on in D.C. and around the globe. Many experts are still bullish.

"Global stock markets continue to grind higher, shrugging off political turmoil in Washington & Rio, Middle East tensions and increased Brexit uncertainty," said John Praveen, managing director of Prudential International Investments Advisors. He added that "stocks remain supported by strong earnings growth."

Philip Orlando, chief equity strategist at Federated Investors, also thinks the market will drown out the political noise. He's sticking with his year-end target of 2,500 for the S&P 500. That's a more than 3% gain from current levels.

Related: Market madness returns as techs plunge

Orlando says the recent rebound in oil and bank stocks -- two areas that have lagged the broader rally -- will continue. He believes crude prices have bottomed and interest rates will continue to go up, and this should boost bank's lending profits.

Orlando is bullish on banks even though he does not believe Trump and Congress will be able to succeed in efforts to pare back the Dodd-Frank financial reform law anytime soon.

Amar Reganti, a strategist at money management firm GMO, also isn't expecting the president and lawmakers to give the markets or economy a boost.

He thinks Federal Reserve Chair Janet Yellen will continue to stress that the Fed will not raise rates too quickly and that Treasury Secretary Steven Mnuchin will be able to convince Congress to raise the debt ceiling by September, before the government could breach its legal debt limit.

"I don't think Yellen is likely to make a policy misstep with rates," Reganti said. "And Mnuchin is saying all the right things. The U.S. Treasury bond market is still the envy of the developed world. Why damage that with a self-inflicted wound?"

But even though many think the broader market may continue to climb, the big debate is about what's next for high-flying tech stocks.

Related: Apple vs. Google: Which is the better stock?

Orlando said technology stocks -- which have taken a bit of a beating lately -- should bounce back as investors realize that earnings will remain strong. He thinks businesses will still need to spend a lot on tech to upgrade aging equipment.

But others warn that tech stocks could tread water for the foreseeable future.

"Our research suggests that popular, pricey stocks have low odds of outperforming in the long run, even if they are shares of large, growing, and profitable companies," said John West and Amie Ko of investment firm Research Affiliates in a report.

The title of that report? "Are You Underweight FANMAG? Chillax!" It's a reference to six techs that have been market darlings -- Facebook (FB), Amazon (AMZN), Netflix (NFLX), Microsoft (MSFT), Apple (AAPL) and Google (GOOGL) owner Alphabet.

West and Ko urged investors to broaden their horizons and look for cheaper stocks that may be better bargains.

It will be interesting to see if Wall Street heeds that advice or if investors flock back to big techs after the Fourth of July. But after a crazy first half of the year, we all should probably chillax.

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