Markets still have room to correct themselves before the year is over despite the traditional strength brought about by the holiday season, BTIG technical analyst Katie Stockton told CNBC on Thursday.
"There's been a little bit of a loss of momentum recently on a short-term basis as we've approached 20,000 for the Dow industrials," Stockton said. "That's not really a resistance level, but somehow market psychology creates a little resistance at times near those round numbers, so this would be a very natural place for a pullback tenfold."
"I've been of the belief that the pullback will actually start before year-end, so no Santa Claus rally," she told "Squawk on the Street." The timing for such a rally is usually in the week between Christmas and New Year's Day.
While Stockton said the market remains bullish on the long term, she argued that it is largely overbought and needs relief. She recommended that investors wait to add exposure, or invest in particular stocks or sectors, until early 2017.
"When we see a pullback, we want to be adding exposure to potentially take advantage of that," Stockton said, adding that the absence of a Santa rally might let markets take a breath before moving steadily into the new year.
"We might not see [the Santa rally] this time because we actually have some momentum [in] sell signals arising just now, so I think that'll unfold and take us into early January," she said.
But while the market may be overheated, that doesn't necessarily mean it's oversold, Jim McDonald, chief investment strategist at Northern Trust, told "Squawk Alley."
"I think it's important to put the rally into context. The average rally after an election over the last 100 years or so has been under 1 percent, so we've had a huge run so far," McDonald said Thursday.
"I think there has been an uptick in investor sentiment that will bring new money off the sidelines, and it's my sense that many investors are overweight cash ... so I don't think we're going to have a lack of new buyers," he continued.
McDonald believes there's still room for the market to run, and provided President-elect Donald Trump is able to enact some of his economic policy proposals, there could be an even bigger boost in market activity in 2017, he said.
"If we get a reduction of the tax on overseas profits, that could really lead to a jump in buybacks next year," he said. "I would expect hundreds of billions of dollars to come back into buybacks through a reduced [re]patriation tax, so I think it will be meaningful if that gets done in 2017."
And though animal spirits are running high, that isn't enough to bring about any kind of meaningful economic downturn, according to Glenmede's director of investment strategy, Jason Pride.
"We just don't have the excesses and the extreme animal spirits ... built up that normally bring about the end of an expansion," Pride told "Squawk on the Street" in a separate interview. That's good for equities toward the end of this year and into next year, he said.
"We're not necessarily calling for a lot of 10, 15 percent gains, but we are saying this is a supportive environment for the economics and for equity investors on the whole," he added.
The fear that the market could oversell to the point of bringing the economy into recession is far-fetched, Pride said.
"You have a buildup of manufacturing capacity, of business capacity, a big buildup of debt. Those sort of things tend to end in a very difficult manner and bring about the recessions. We haven't really seen that now. What we're seeing right now is a buildup of confidence," Pride said.
The investment expert said it's not enough to spur a recession, but "just enough to perhaps say, 'Look, the markets may be just a little hair ahead of themselves and may see some difficulty on a near-term future.'"
"But on the whole, the big backdrop is still a positive one in a positive direction," Pride said.
Appearing in the same interview, Mark Kiesel, Pimco's global head of corporate bonds, said that there is strong support for the equity market, but that investors should take care not to forget some of the headwinds that could pose problems for the market in 2017.
"While the market's romancing all the positives of Trump, what they're not romancing right now is basically the protectionist policies, the anti-immigration policies, the strong dollar, the higher interest rates, and quite frankly, that will slow growth," Kiesel told CNBC on Thursday.
The bond expert had a word of advice for investors swept up in the market's bullish optimism.
"There's positives and negatives, and our message is de-risk right now because there's two-way risks in the market," Kiesel said. "And right now, the market has really embraced mainly the positives."