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A stock market drop is coming, but don't blame Trump's health-care bill setback: Raymond James

President Donald Trump's and House Speaker Paul Ryan's decision to pull the Republican health care bill hours before Friday's vote won't cause irreparable damage to the bull market, according to Raymond James.

However, don't get too comfortable.

The firm's chief investment officer, Jeffrey Saut, is warning investors that stocks are in a danger zone — one that's big enough to wipe out a chunk of gains from the so-called "Trump Rally." He believes stocks will come under pressure Monday, as investors take the health care setback as a sign that Trump's business friendly agenda is seeing serious cracks.

"You already have technical damage in the market. It was pretty evident last Tuesday," said Saut in reaction to the news. "The [S&P 500 Index] has been trapped in a trading range since mid-February."

The worst case scenario would be a five to ten percent pullback from these levels, according to Saut.

In a Friday research note, he wrote that Raymond James remains "in cautionary mode given our models, and the fact that the SKEW indicators suggest that 'smart money' is hedging for a significant downside move from here."

Saut published that note hours before the health care bill suffered what Ryan called a 'failure,' one that helped push major averages to their biggest weekly losses of the year.

Yet Saut, who acknowledges being erroneously cautious since early February, reiterates that the long-term model remains positive, and he's been a bull since March 2009.

"Secular bull markets tend to last 14, 15, 16 years. We're eight years into this one. It suggests there are years left to run," said Saut on CNBC's "Futures Now" last week.

"I would also note that we have transitioned in our opinion from an interest rate secular bull market where interest rates come down and price earnings multiples expand to an earnings driven secular bull market."

He believes technology, financials and energy stocks are the best places for investors right now, and getting too defensive would be a mistake.

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