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Power Play: Balancing portfolio in a volatile market

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.

Stocks are rallying on the last trading day in January, with the S&P 500 moving out of a correction. The market is on track for a second straight week of gains, but the major averages are still negative for the year.

PNC Asset Management CIO Jim Dunigan tells CNBC's "Power Lunch" on Friday investors need a balanced portfolio now.

"We continue to have a baseline allocation of stocks to bonds of 65 percent equities/ 35 percent fixed income in a balanced account," Dunigan said.

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He expects sentiment to remain gloomy until the mindset changes to being nervous about missing out on a rally.

"Focus on high quality stocks and a tactical allocation to Europe and Japan and a slight overweight to value," Dunigan said.

The pan-European STOXX 600 and the Nikkei closed higher on Friday.