Beware this investing mistake: Strategist

For investors becoming disenchanted with U.S. stocks, one investment officer says it's time to turn to another burgeoning opportunity abroad.

Specifically, Curtis Holden of Tanglewood Wealth Management says people are passing over international markets such as Europe and Japan in favor of U.S. equities. However, developed markets have an important place in an investor's portfolio right now, he contended.

"A lot of investors have kind of left the EAFE stocks for dead," Holden said Thursday on CNBC's "Trading Nation," referring to the index that tracks developed markets in Europe, Australia and the Far East.

"If you're just investing in the U.S., you're making a mistake," Holden told CNBC. "Don't get too pessimistic about the rest of the world. Remember that the EAFE stocks have some good things going for them right now and take that into consideration as you're structuring your portfolio."

However, Dennis Davitt, chief investment officer of Harvest Volatility Advisors, said the true mistake is getting into European and Japanese stocks.

"I'm still cautious on [markets] outside of the U.S," Davitt said Thursday on "Trading Nation," given the steep drop in commodities prices over the past year. While Holden said developed countries are actually benefiting from falling commodities prices, Davitt believes that the weakness in emerging markets translates to more pain for regions like Europe.

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"The reality is, Europe deals with commodity-driven nations," he said. Contrary to what some believe, "they are very oil dependent."

European stocks also tend to react more strongly to negative news, Davitt said. Instead, he recommends that investors craving international exposure look to multinational U.S. companies or outright bets on commodities. For example, the S&P 500 should outperform the small-cap Russell 2000 in times of international economic strength, he said.

"If you look at multinational companies based in the U.S., embedded in them you get the international exposure that you're looking for," he said Thursday.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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