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Power Play: Brace yourself for market risks and volatility

NYSE New York Stock Exchange traders markets
Brendan McDermid | Reuters

Despite the huge market rally we've been seeing since September, investors still have to brace themselves for volatility and market risks.

Merrill Lynch Private Bank and Institutional Chief Investment Officer Chris Wolfe tells CNBC's "Power Lunch" on Friday he expects volatility to remain elevated due to policy uncertainty and global growth concerns.

We "would advise using this as an opportunity to rebalance and put excess cash to work. We have a positive outlook on the global economy, but recognize several risks to our outlook: a deepening economic slowdown in emerging markets, led by China, spreading to developed markets [and] policy mistakes by central banks," Wolfe said.

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Wolfe is also concerned a disorderly weakening of the Chinese yuan will lead to further devaluations by China's trading partners.

Northern Trust Chief Investment Officer Bob Browne, who has $887 billion in assets under management, remains fully invested in a low-return world, but is underweight emerging market equities, including China.

"You can think of us being short cash and investment grade bonds to fund long positions in high yield, and being short non-U.S. equities (developed and EM, and commodities) to fund long positions in U.S. equities," Browne said.

Browne sees a possible hard landing in China, the U.S. dollar's strength and the potential for heightened volatility as the biggest market risks.

The Dow, S&P 500 and Nasdaq are modestly lower during trading, while the Shanghai Composite closed higher.