Maybe things were going too well in the stock market.
Citigroup's chief U.S. equity strategist Tobias Levkovich said he is now more cautious about the stock market, "not because markets are up, but because our sentiment model is showing complacency," he told CNBC Wednesday.
He told Squawk on the Street he is expecting volatility to continue over the next few months. Where in November every news event prompted huge jumps and falls in the market, now it's the opposite.
"Apparently we resolved all of Europe, the U.S. has no fiscal cliff, China — hard landing, soft landing — settled. Iran, no issues to worry about," he said. "That was kind of extreme the other way. You're putting yourself at more risk. I refer to the market right now as being somewhat accident-prone."
Valuations are not as good as they were in October and November when Levkovich was one of the few to recommend investors jump back into the stock market with both feet before the Standard & Poor's 500 rose 30 percent. Now he is concerned earnings expectations have jumped from the low single digits in the first quarter to 16 percent for the coming fourth quarter.
That "seems pretty aggressive, pretty hockey stick-like, and I'm not sure what the impetus is going to be in the second half to really crank up the numbers that way," he said. "I think we’re going to see through the summer some of that adjustment downward on earnings expectations."
He predicted that "companies are going to be a little reluctant to give really bullish outlooks because they see some uncertainties. The quarter we’re going to have to watch on that is the June quarter...where they’re really gonna have to give a little more insight to the second half, where you’re gonna get the guidance issues I’m concerned about."
Here's another area that worries him: Europe. While investors have been focused on Spain and its bond auctions, Levkovich is concerned about France, especially when the leading presidential contender in the Socialist party "talks about not letting financial markets dictate French economic policy. That would be a disrupter in the next few weeks to expectations around Europe."