Keep your eyes on these two things when investing this summer: Analysts

What will spook the market?

With all the noise about a possible Federal Reserve rate increase and the presidential elections, investors shouldn't forget about the Chinese economy and diverging monetary policies overseas this summer, two analysts said Wednesday.

"I think China is still something we need to watch for," Sarat Sethi, co-managing partner at Douglas C. Lane & Associates, told CNBC's "Squawk Box."

Overnight, three surveys of Chinese economic activity revived doubts about the durability of the recovery in the world's second-largest economy.

The official May manufacturing Purchasing Managers' Index came in at 50.1 (a PMI reading above 50 indicates expansion in activity while a number below that indicates contraction).

Chinese workers making shoes at a factory in Jinjiang, in southeast China's Fujian province.
China manufacturing and services PMI fall in May

But the Caixin manufacturing PMI index slipped to 49.2 in May, the 15th-consecutive month of contraction, while China's services sector also slipped last month.

"If the dollar gets stronger again, and you see their currency starting to devalue, they're going to start feeling the effects of all this. I think that, globally, is going to affect them. When oil was down at $25-$30, it was actually helpful for them. But now with oil back at $50, that's one of their biggest input costs of commodity prices going up," Sethi said.

"If our currency gets stronger, that, as you know, last August caused a massive revaluation of the global markets as well."

Last summer, financial markets across the globe tumbled, with a slowdown in China's economic growth, as well as a soaring dollar, at the center of the storm.

Santoli: Here's why the Fed is suddenly hawkish

Another concern is the Fed is looking to tighten at a time when the Bank of Japan and the European Central Bank are holding interest rates in negative territory, trying to jump-start their economies, said Michael Tyler, CIO at Eastern Bank Wealth Management.

"With that happening there and the Fed raising here, you do run the potential of the dollar getting so strong, or the yield curve flattening out as long rates are driven by currency exchange and stay low," he told "Squawk Box." "That could start scaring investors as well."

Market expectations for a Fed rate hike in June were 23 percent Wednesday, according to the CME Group's FedWatch tool, but were nearly 60 percent for July.

"I think July is the most likely time, and I think we see one more hike later this year as well," Tyler said. "I think markets are prepared to accept that. When you see the futures markets are predicting 60 percent probability [for a] rate hike, it tells you that bond markets and stock markets are feeling comfortable right now about that."