John Traynor, chief investment officer at People's United Advisors, said investors should watch two major events in 2018: midterm elections and simmering global trade tensions.
"We think the earnings growth is very strong, we think the economy is very strong, but you're being buffeted by those two trends, and they will impact the second half of the year," Traynor said.
1. Midterm electionsAs the November midterm elections grow closer, Traynor said, "You're going to see a lot of market volatility and turmoil."
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2. Trade tensionsIt's not just chatter, Traynor said global trade tensions could actually slow the economy.
"The more the trade tensions roil the global markets and stay in the headlines, the more we're worried it will have a negative impact on business and consumer confidence," he said.
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China's debt load is worrying investors and observers.
One option for investors in a tense trade period is small-cap stocks.
"Small caps right now are really perfectly suited for the trade dust-up we're seeing," Traynor said.
That's because large-cap stocks tend to be more internationally exposed, while small caps are more focused on the domestic U.S. economy. If trade rhetoric begins to soften, large-cap stocks could bounce back, Traynor said. But as of now, he said the trade tensions will stick around a little while longer.
People's United Advisors has $6 billion in assets under management.
