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Why investors should turn to small and mid caps: Strategist

Investors should reduce their exposure to large-cap stocks in favor of small- and mid-cap equities, seasoned Wall Street strategist Nicholas Colas told CNBC on Wednesday.

Of particular concern to his clients are first-quarter earnings and slowing revenue growth, he said.

"They see estimates that had to come down just to get beaten," the chief market strategist at Convergex said in an interview with "Power Lunch."

"The bottom line, it is not just oil and not just currency. It is a slow U.S. economy dragging down corporate earnings and they're looking to the first quarter to be the trough for the year. But at 18 times earnings … we're looking at a pretty expensive market."

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While Colas isn't calling for a market crash, he believes there could be a 5 to 10 percent pullback as money flows out of the U.S. and into Europe and Asia.

Mid- and small-cap stocks, which have less exposure to the U.S. dollar, "are much more fruitful," Colas said.

In fact, the S&P mid-cap index has outperformed the S&P 500 by almost 2 to 1, he noted.

"You can just buy the indices and let the stock picking to someone else or you can look at individual stocks," he said.

Colas specifically likes tech.

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—CNBC's Jennet Chin contributed to this report.

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