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Market rally after midterms? Why Michael Farr is worried

Conventional wisdom on Wall Street is that stocks will rally if Republicans take control of the Senate in Tuesday's midterm elections. However, one market pro told CNBC he's not necessarily buying into the optimism.

Michael Farr, president of the investment management firm Farr, Miller and Washington, agreed that the news feels good and precedents are very positive. In fact, he said, during President Bill Clinton's term 20 years ago, the Republicans captured the House and Senate and the S&P 500 saw a 53 percent gain over the next two years.

According to most polls, Republicans are poised to gain the Senate majority on Tuesday.

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Traders on the floor of the New York Stock Exchange.
Getty Images
Traders on the floor of the New York Stock Exchange.

However, Farr still has concerns.

"I'm worried because of valuations. I'm also worried ... because everybody is singing songs of sunshine right now," he said in an interview with "Street Signs."

In other words, the market is up almost 200 percent since the lows of March 2009, after the financial crisis, and "nobody's looking down as to what might happen," explained Farr, also a CNBC contributor.

"When it feels too good to be true, and it kinda feels that way now, I want to make sure I have a chair nearby when the music stops."

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Then there is the issue of what may happen if Republicans do not win the Senate.

"If for some reason the Democrats retain control of the Senate, then that would be quite a surprise to Wall Street, and I think you could see some selling," Farr said.

However, if the polls are correct and Republicans gain control of the Senate and increase their control of the House, he'll be looking for any sign that the two parties are willing to work together instead of going back to gridlock.

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"Some sort of progress from Capitol Hill in those early days would be very encouraging to markets," he said.