Market Overview

Strategist Cautions Investors: 'Let's Not Get Too Comfortable'

Strategist Cautions Investors: 'Let's Not Get Too Comfortable'

If history is any indication of future performance, investors should expect a pullback in stocks throughout the rest of 2019, Ryan Detrick, senior market strategist at LPL Financial, told CNBC.

What Happened

From a historical perspective, when the S&P 500 gains 10% throughout the first half of a year, it averages a return of 7.5% in the back half of the year, Detrick said during a recent "Trading Nation" segment.

Yet when the market performs better than 10% in the first half it should have investors concerned for what comes next, he said. 

The S&P 500 index is up more than 15% in the first half of 2019 for only the 10th time in the past seven decades, Detrick said. When this occurs, the index pulls back by 12.1% on average in the back half, with the record being a 34% pullback in 1987, the strategist said.

Why It's Important

The "scary third quarter" could bring in a double-digit correction, Detrick said, giving this advice to investors: "let's not get too comfortable."

While the likelihood of a correction at this point "makes sense," investors should consider being buyers of the dip based on recent history, he said. 

"We all saw that scary fourth quarter, and then sure enough three to four months later, we're making new all-time highs," he told CNBC.

"Why is that? Well, people get so bearish and so scared, so fast. That contrarian in us thinks this rally still has a ways to go."

What's Next

If stocks do experience a double-digit decline Detrick, said two groups of stocks could "really do well off a well-deserved break." The groups are cyclical sectors — like industrial — and plays on Sino-American trade improvements via the iShares MSCI Emerging Markets Indx (NYSE: EEM), he said. 

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