Though the U.S. economy could continue to grow in the second half of the year, the threat of rising inflation will likely be a major concern for investors, analysts told CNBC on Thursday.
"The big risk that is not being factored into stocks and bonds is inflation. You can't have central banks around the world printing money the way they are and not have the risk of inflation," Charles Bobrinskoy, vice chairman at Ariel Investments, said on "Squawk on the Street." "It's not being built into stock prices or bond prices, so we think you got to protect yourself and your portfolio against inflation going forward."
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Dean Maki, chief U.S. economist at Barclays Capital, agreed. Maki said inflation will likely make a "steady move higher" and surpass the 2 percent target inflation rate set by the Federal Reserve by year end. In turn, Maki thinks the Fed will likely hike interest rates by mid-2015. The markets have not yet priced in an interest rate hike, so the fixed income market could sell off as expectations shift, he said.
To Nicholas Colas, managing director and chief market strategist at brokerage ConvergEx Group, it makes "a ton of sense to be cautious" given the rally in bonds despite interest rates at near zero. However, Colas said it's too early to get overly worried about inflation because there's a lack of wage inflation. In other words, he thinks it's time to worry when people can't afford to buy goods because they're making less due to inflation.
But Bobrinskoy argued that now is the time to be concerned about inflation, regardless of wage inflation.
"When governments are printing money, which they are, eventually it's going to show up in the value of each of those dollar bills being worth less and so you don't need to have short-term labor pressure," Bobrinskoy said. "We've had very good labor markets, but they're going to start getting tighter and we're going to have inflation. It's just a matter of when."
On the bright side, all three observers said the economy should continue to gain steam, albeit slowly.
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"The U.S. economy is still running on maybe 2½ out of eight cylinders, so we do need to see some improvement there," said Colas. "The market's anticipating it, and so I do think we're going to see some of it, but it's going to be a lot more choppy than I think all of us hope."
Bobrinskoy is "cautiously optimistic" about the remainder of the year. He thinks there will be a "bounce back" in gross domestic product growth thanks to pent up demand from a "very weak" first quarter, with strength in auto and home sales, as well as energy.
Like Bobrinskoy, Maki thinks economic growth will be modest, but above the trend line in the back half of the year.
With inflation fears top of mind, though, Bobrinskoy recommends investors avoid bonds. Instead, he suggested stocks that tend to do well in an inflationary environment, such as fertilizer companies and oil stocks. Maki agreed that oil will likely continue to push higher, especially given the mounting unrest in the Middle East.
—By CNBC's Drew Sandholm.