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Expect Stock Downside Move in Next 3 Months: Pro

Stocks rose Monday amid expectations that the Senate will vote to extend tax cuts. Keith McCullough, CEO of Hedgeye Risk Management and CNBC contributor, shared his outlook.

“You’re going to have to arm wrestle with stocks and volatility,” McCullough told CNBC. “Once we get through year end, there’s going to be a 3 to 7 percent downside move in the next three months—so 1,157 [on the S&P 500] is a trendline support.”

McCullough warned investors that in the next 3 to 6 months, economic growth will slow and inflation will accelerate. In addition, he noted that bond risks in the U.S. look similar to the European sovereign debt risks at the beginning of last year.

McCullough said he is bullish on the dollar and commodities such as corn. Meanwhile, he advised investors to stay away from U.S. equities and the euro.

“We think Italy will be a potential catastrophe in the next 3 to 6 months—EWI is the ETF on that side,” he cautioned. “And we’re going to stay short U.S. treasurys on the short end of the curve—SHY is the ETF for that.”

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Monday's Top Dow Gainers (As of Mid-Morning):

Chevron

Verizon

Walt Disney

Caterpillar

Merck

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Disclosures:

No immediate information was available for McCullough or his firm.

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