Bulls vs bears: Here's a debate about the year's second half

Stocks have been flat for 18 months, but some market participants see potential upside in the second half despite many reasons to doubt the staying power of this weeks' gains.

After Thursday's close, the Dow Jones industrial average (Dow Jones Global Indexes: .DJI) and the S&P 500 (INDEX: .SPX) were virtually unchanged for the year, having gained just 2.69 percent and 2.90 percent, respectively. Both were flat in 2015 overall.

That said, the first half of the year has been anything but uneventful. A global recession scare roiled financial markets across the globe, led lower by the crude market. U.S. oil on Feb. 12 hit its lowest level since May 2003.

Investors and traders also dealt with central banks implementing creative monetary policies to jumpstart their economies — including the Bank of Japan and the European Central Bank — and, most recently, were caught off-guard by the United Kingdom's vote to leave the European Union , or the so-called Brexit .

Those factors, among many others, have raised doubts about whether this market can go higher, but some are maintaining a positive outlook.

Yes, the Dow and the S&P are flat for the year, but that's still better than most stock indexes around the world.

Entering Friday, the pan-European Stoxx 600 (STOXX: .STOXX) index was down 9.82 percent year to date, while Japan's Nikkei 225 (Nihon Keizai Shinbun: .N225) had shed 18.17 percent. China's Shanghai composite had also fallen 17.22 percent for 2016.

S&P (blue) versus major world indexes in 2016

Source: Factset

Another factor that may drive stocks higher in the second half is an improvement in corporate earnings.

Raymond James Chief Investment Strategist Jeffrey Saut said "we think earnings are going to be positive moving forward."

S&P earnings for calendar third and fourth quarter are expected to rise 2.17 percent and 8.16 percent, respectively, according to data from S&P Global Markets Intelligence.

Saut also said that U.S. economic fundamentals remain solid and "I continue to expect new all-time highs by the end of the year."

"We're going to see another weak quarter on earnings, but it's going to be the last one," said Phil Davis, CEO at PSW investments.

Sander Read, CEO at Lyons Wealth, said he expects the market to keep trading sideways for the next 12-to-18 months, and he said that will be good for it.

"I think we're set up for a long-term bull market," he told CNBC by phone, adding that more sideways trading gives the bull market "a floor to stand on."

The bears, however, are striking a much more dire note.

U.S. stocks are not in a bear market — which technically is defined as down at least 20 percent from their 52-week high — but a long-term bull market is slowing down.

"This is a 7-year-old bull market," Adam Sarhan, CEO of Sarhan Capital, told CNBC via telephone. "Irrespective of the latest headline du jour, this is an aging bull market."

"When you step back and look at the entire global stock market, it's a pretty bleak picture," he said.

Sarhan noted that the Nikkei was not only down sharply for the year, but was trading about 70 percent off of its all-time high, which was reached in 1989. He also said London's FTSE 100 was near its lowest level since 1999.

Another uphill battle the market will face in the second half is earnings growth.

S&P Global Markets Intelligence expects U.S. second-quarter earnings to have fallen 4.99 percent and, while it sees growth picking up in the second half, shares could be pressured by the uncertainty surrounding the Brexit vote.

"I'm expecting there remains a lot of risk to the out quarters as management will likely take an extra cautious stance on guidance given the increased uncertainty related to global growth concerns since the Brexit vote," Lindsey Bell, analyst at S&P Global Markets Intelligence, told CNBC in an email.

Another factor that may weigh on the market is the uncertainty surrounding the Brexit vote.

"This could set up for what we call the disaster scenario," said Matt Tuttle, chief investment officer at Tuttle Tactical Management.

Tuttle noted that global growth is weak, and this vote opens the door for a break-up of the EU.

The vote, which took place last week, sent financial markets across the globe into flux, with U.S. stocks falling sharply afterwards, but they've rallied this week.

Meanwhile, central banks across the globe are struggling to accelerate global growth, forcing them to keep interest rates low and pushing yields lower.

The 10-year U.S. Treasury note yield (U.S.: US10Y) last traded near 1.41 percent after kicking off the year above 2 percent. The 10-year German bund yield closed at an all-time low of negative 0.13 percent on Thursday.

"If you go to Treasurys, they aren't yielding anything," Tuttle said. "You've got to have some sort of tactic that exposes you to risk when it makes sense and covers you when it doesn't."

Adding to market uncertainty are the U.S. elections. Former Secretary of State Hillary Clinton and business magnate Donald Trump are on a collision course for the U.S. presidency.

Clinton has led Trump in some recent polls, but "what this Brexit vote tells you about polls is that the polls don't matter," said Sarhan.

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