Time to hit pause button on stock rally

With stocks around the world surging this year, the global market rally is in need of a pause.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

Maybe it's time to change that Wall Street phrase about stocks in the summertime to "Sell on the 23rd of May and go away?"

Stocks around the world took a hit Thursday on the heels of a disappointing report on Chinese manufacturing activity. Japan's markets bore the brunt of the sell-off, with the Nikkei plunging 7%.

U.S. stocks fell at the open before recovering. Still, the U.S. market was relatively flat one day after the market did a Fed flip-flop and finished lower. The Dow is now down about 2% from the intra-day high it hit earlier Wednesday.

It's about time. This pullback is healthy and necessary. It arguably needs to be bigger. And it could wind up being the proverbial pause that refreshes.

CNNMoney's Fear & Greed index still in Extreme Greed mode

The volatility of the past two days is not likely to be the start of a new bear market. It may not even turn out to be a 10% dip from the recent highs, what's known as a correction.

Instead, it looks like the beginning of a period for stocks to move sideways as investors try and figure out if the global economy, and by extension corporate profits, is really about to slow down dramatically or just cool off slightly.

The Nikkei is still up 39% this year after accounting for today's drubbing. The Dow, S&P 500 and Nasdaq are all up about 15% so far in 2013.

Stocks are even surging in Europe, where the winds of recession (and not change for you Scorpions fans) are still blowing. France's CAC is up 8%. Germany's DAX has gained 9%. And those indexes are losers compared to what's going on in one of the eurozone's most troubled members. The Athens Stock Exchange is up 14% this year.

Returns of this magnitude are fantastic for a period of 12 months, let alone five. It's only natural for investors to take a breather. Heck, it would be downright bubbilicous if stocks continued to keep going up no matter how weak the economic data was.

But here's the thing. The fact that the global economy is still far from tip-top shape is actually, in a twisted bad news is good sort of way, a positive thing for stocks.

The Bank of Japan, the European Central Bank and that little outfit called the Federal Reserve will continue to do everything they can (oh, excuse me Signor Draghi, I meant "whatever it takes") to keep their economies from plunging into another 2008-like abyss.

Related: The U.S. looks like Japan. Investors rejoice.

Abenomics is alive and well. The ECB could cut interest rates again.

And the Fed? Don't throw away your QE4EVA t-shirts just yet. The only thing getting tapered these days on Wall Street are the Armani suit pants of CEOs and investment bankers.

"The market is in need of a pullback but it should be relatively short and shallow," said Paul Nolte, managing director of Dearborn Partners, an investment firm in Chicago. "Global economic growth remains modest and stocks have continued to go higher because central banks around the world are being so accommodative."

Nolte said that market worries about some Fed members being willing to cut back on asset purchases as soon as June should not be a surprise. It seems that Fed chair Ben Bernanke encourages a healthy debate, unlike his predecessor Alan Greenspan, who seemed to prefer the unanimity approach to policy-making.

"There's been dissension in the Fed? Yeah. But that's been the case for three years. Divergence of opinions is healthy," Nolte said. "The Fed isn't going to go from easing to tightening in a quarter. Any unwinding is going to be gradual."

Related: Fed's Dudley says current exit strategy plan is 'stale'

Exactly. What's more, there are no signs of disagreement among the Fed's most influential members: the triad of Bernanke, vice chair and possible Bernanke successor Janet Yellen and New York Fed president William Dudley. (They're sorta like the central banking equivalent of the Miami Heat's Big Three of LeBron James, Dwayne Wade and Chris Bosh.) The only time to worry about the end of QE is if you hear one of these three talk about it.

What's more, the U.S. economy actually does appear to be in relatively decent shape. It's not fantastic by any means. But the job market is still slowly improving. And housing is picking up dramatically.

Brian Levitt, senior economist with OppenheimerFunds, thinks that will help keep stocks moving higher ... even if the next few months are a bit bumpy.

"There is no reason to be worried about the volatility. There is little to suggest that the U.S. is heading back into a recession," Levitt said.

Still, China is the big wild card for investors. If its economy does slow further, that could hit developed markets around the world very hard. Europe is China's largest trading partner. Anyone who knows how to look at a map (and read today's headlines) should be able to figure out that China's health is crucial for Japan.

And like it or not, a strong Chinese economy is needed if many U.S. multinationals want to keep reporting decent profits.

Companies ranging from General Motors (GM) and KFC owner Yum! Brands (YUM) to industrial giant Caterpillar (CAT) and "struggling" tech firm Apple (AAPL) all have big bets on China.

"China should be a big concern. The decline in manufacturing is a huge issue," said Aaron Izenstark, co-founder and chief investment officer of IRON Asset Management. "A Chinese slowdown could be like a waterfall that brings other economies down with it."