The retail sector on fire this year, up about 10 percent, as investors bet the U.S. economy is growing at a faster pace than Europe.
But market veteran Michael Farr, president of Farr, Miller & Washington and CNBC Contributor, tells CNBC's "Power Lunch" on Tuesday he's cautious on the consumer discretionary space, especially retail.
"There are signs that the monetary easing in Japan, Europe and China is having some positive effect. If this is sustained, we think investment dollars will flow out of expensive retail stocks and into more multinational companies that have underperformed," Farr said.
He is also looking at the impact of higher interest rates on economic growth. "We are concerned about the economy's ability to withstand the removal or reversal of some of those stimulants," Farr said.
Retail is lower during trading.