In a move widely expected by investors, the Federal Reserve raised its rate target on Wednesday. And though markets rallied sharply off of the news, one investor says it should serve as a reason to step away from stocks in the U.S. and around the world.
"We would be neutral to underweight on all risk assets in 2016," said Chad Morganlander, portfolio manager with Stifel Nicolaus, in a Wednesday afternoon interview on CNBC's "Trading Nation."
Morganlander believes that emerging markets are likely to weaken in the year ahead, pressuring profit growth in the U.S. This in an environment where margins are already high, and valuations are rich, meaning that there is little room for error.
"Credit growth in China will decelerate at a rapid pace, and remember that emerging markets generate 75 percent of global growth," he said.
"I find it hard to expect that market multiples will expand in that kind of environment, unless the Federal Reserve is extremely accommodative — but they're not; they're slowly moving toward a more neutral stance."
Additionally, higher rates will create upward pressure on the dollar, further hurting earnings, he predicted.
"We're not uber-bearish — we're not Marc Faber," Morganlander quipped. "But as a portfolio manager, as someone who runs actual money, we're going to be more cautious when valuations become overstretched," particularly since Fed policies are becoming incrementally less supportive of the market.