The second half of 2016 may produce better earnings, but fundamentals indicate the market is due for another dip before the first half is through, Federated chief equity strategist Phil Orlando said Tuesday.
Orlando told CNBC he sees stocks pulling back 5 to 8 percent in the next two months amid slowing economic growth, soft first-quarter earnings, and the potential for another collapse in crude prices.
Given that expectation, Federated has gone neutral on stocks with a roughly 60 percent allocation to equities, Orlando said.
"We've got a little more cash than normal, a little more bonds than normal. And the equities that we're investing in are more defensive — the lower beta, higher dividend yielding. So we're playing a little bit of defense right now," he told CNBC's "Squawk Box."
The Atlanta Fed revised down its estimate for first-quarter U.S. GDP growth to 0.4 percent, signaling a continued moderation in economic gains, he said.
Meanwhile, corporate revenues are set to decline 1 to 2 percent year over year, and earnings per share are seen down as much as 8 to 9 percent, he added.
Crude prices may not provide relief either, Orlando said. He believes Iranian intransigence will torpedo a meeting of oil producers in Doha on Sunday aimed at capping production at January levels. That could send oil prices back below $40 a barrel, creating drag on stocks, which have closely tracked crude.
"As we look at the world, the first half from an earnings standpoint will be punk. We'd like to believe the second half will be better," he said. If the fundamentals fall into place, that can happen, he added.