The third quarter earnings season has kicked off, and Keybank Chief Investment Officer George Mateyo joins Market Domination to discuss what investors can expect and the outlook of the market.

Mateyo notes that third quarter earnings expectations are "mildly priced" as investors expect a slight deceleration from second quarter earnings. However, this earnings season will mark the fifth consecutive quarter of positive year-over-year earnings growth, and he expects higher growth than currently forecasted.

"Typically, actual earnings have exceeded forecasts 37 of the past 40 quarters. The three quarters in which they didn't exceed expectations were March of 2020, and the third and fourth quarter of 2022. In that environment, we, of course, had the Covid pandemic in 2020, and then the Fed in 2022 was aggressively raising interest rates. Neither one of those is with us today," he tells Yahoo Finance. Thus, he expects earnings growth to be closer to 8% rather than the forecasted 4%.

Heading into 2025, Mateyo expects earnings growth in the mid-teens. He adds, "I would think that maybe in the near term, so long as the economy continues to grow, as long as we continuously moderate inflation, we can still see pricing pressure pushing through in terms of top-line growth and also some cost-cutting that will allow earnings to come through as well."

As the S&P 500 (^GSPC) approaches its second anniversary of a bull market, Mateyo highlights that valuations are "rather full," and therefore, he "would not be surprised" to see a moderate pullback in the near term. In the current backdrop, he favors quality stocks trading at reasonable valuations.

"We like companies that have strong balance sheets and really generate high return on capital and high return on invested capital," he explains. He also highlights opportunities in more cyclical sectors as well as names in energy (XLE), materials (XLB), and financials (XLF).

He adds that the tech sector "really deserves some representation in every portfolio." However, he is more picky when it comes to some of the players as "certain names are probably poised for a bit of a pause."

To watch more expert insights and analysis on the latest market action, check out more Market Domination here.

This post was written by Melanie Riehl