US Markets

The new year may bring more pain than gain for markets: Currency expert

Trading block: US dollar and oil lessons

The bullish spirit in the market may be curbed by early 2017, which will bring increased volatility and a sense of pause as investors wait for the Trump administration's first policy move, currency expert Kathy Lien told CNBC on Thursday.

"We won't get a lot of that stimulus until the second half of the year at the earliest, and I think at the onset, it's really going to be more pain than gain," Lien told "Squawk Box." "We still have six months to go before we get any real boost, in my opinion."

Lien, managing director of FX Strategy at BK Asset Management, said January tends to be an uneasy month for markets.

"January always brings us significant volatility, and I think it really depends upon the presidency and how quickly they come out guns blazing with the stimulus package," Lien said. "I think in the start of the year there definitely could be some profit-taking."

Lien added that she would not rule out the possibility of a market correction next month, especially if earnings miss due to the strength of the U.S. dollar, which has been rallying since the presidential election.

"What I'm immediately worried about is those earnings," Lien said. "We always see earnings miss as a result of a strong currency, regardless of how much hedging a lot of these companies are supposed to do, regardless of how many times this happens, and I think that that could really start to pull back stocks."

Pro: Don't look at Dow 20K, look at this instead...

But Phil Orlando, chief equity strategist at Federated, said dollar strength can have a dual effect on earnings reports.

"The earnings recession is over," Orlando contended on "Squawk Box."

"Certainly the strength in the dollar is potentially going to have a negative impact on large cap, multinational companies that do half or more of their business overseas," he said. "The flip side of that coin is that … small cap companies are doing 80 percent or more of their business here, and the strength of the dollar means that the economy's doing better and they're doing more business."

Large cap companies are those with a market capitalization valued at over $5 billion, like Apple or Facebook. Small cap companies are valued anywhere between $300 million and $2 billion. Some food services companies, like Sonic Corp., are considered small caps.

As a result of the mixed effects of the dollar trending higher, Orlando said that the earnings reports should balance out in the end. The strategist did predict a slight correction at the start of 2017 as well, though not for the same reasons as Lien.

"Volumes [of share trades] are starting to slide, and we're expecting volumes are going to be light into the beginning of the new year," Orlando said.

"I think the market has largely priced in what it was going to price in through the end of the year already," Orlando continued. "Now we're just going to sort of drift and maybe with the lighter volumes we get a little bit of a correction."

Trumponomics a game changer: Pro

Some investors like Ed Campbell, managing director at QMA, are particularly wary of Trump's economic agenda, especially the risks that come with it.

"We think Trumponomics is a game changer in that it's likely to break the economy out of its lower-for-longer rut that it's been in post-financial crisis," Campbell told "Squawk Box."

"The risk is that it does spark growth that is above trend and it reawakens 'animal spirits' and inflation and we get an aggressive Fed and that leads to a sharper downturn two to three years from now. But for now, let's enjoy the party before we worry about the cleanup," he said.

But besides the economy overheating, which could cause faster rate rises by the Federal Reserve, there are larger risks at play, he said.

"The darker side of the Trump agenda for financial markets is the anti-globalization rhetoric we've been hearing out of the president-elect," he said, citing a report from The Hill that said Trump's team was toying with the idea of placing a 5 percent tariff on imports.

"That's something that does not give me the warm and fuzzies. I hope that that's just talk and that's not something that's likely to result in real policies," Campbell said.