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Power Play: Stay away from these sectors in 2016

Traders work on the floor of the New York Stock Exchange.
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Traders work on the floor of the New York Stock Exchange.

As the Fed moves to tighten monetary policy in 2016, the best investment strategy for investors could be staying defensive.

Michael Farr, president of Farr, Miller & Washington, tells CNBC's "Power Lunch" on Wednesday he is concerned about the Fed raising interest rates when we're dealing with a slowdown in global growth.

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"The recent decision by China to peg their currency to a basket of foreign currencies (rather than the US dollar alone) will only cause more disinflationary pressures as a weaker yuan will improve China's trade position vis a vis the U.S.. Many other emerging-market economies are suffering the fallout from capital flight now that the Fed has begun its tightening phase," Farr said.

Even with the Fed in tightening mode, Farr does not believe the Fed will start raising rates quickly.

"Our view is that the economy has become heavily dependent on ultra-low interest rates, and therefore any rise in rates will be contained because the economy simply can't withstand meaningfully higher rates," Farr said.

In this environment, Farr is telling investors to stay away from cyclical sectors.

"We are underweight consumer discretionary. We are also modestly underweight financials as we think there is a little too much optimism over the magnitude of future interest-rate increases," Farr said.

Consumer discretionary and financials are higher during trading.