The may have fallen nearly one percent since coming within a fraction of 20,000 two weeks ago, but one top Wall Street strategist says it isn't an indication the rally inspired by President Donald Trump has ended.
PNC Asset Management's Bill Stone is telling investors to stay the course despite the Dow's third loss in four weeks.
He predicts stocks still have the ability to hit new highs this year, adding that markets are in an 'indigestion' phase for right now.
"A lot of it has to do with how strong things were. When you look at the really strong areas – financials, energy, small caps – they went on a tear post-election," Stone recently told CNBC's "Futures Now." "Over the past month now, they are down a bit."
With that he said, "I'd say that's still the place to look for opportunities."
In December, he told CNBC that the post-election stock market euphoria was fading. Now, Stone says investors may soon get another chance to make fresh profits. It all boils down to historical trends — even though Trump's route to the White House has been anything but traditional.
"About 75 percent of the time you actually see the market down in February after a new president takes over, and it's on average down about four percent," said Stone. If Trump prioritizes his business friendly policies in his first days in office, Stone says it'll give stocks a reason to snap out of the February doldrums.
"The market is typically up though about seven percent in the first year of a new president," he said. "Longer-term I think you can still feel pretty good."
The latest move would build on gains during President Barack Obama's two terms. The S&P 500 Index has surged 148 percent over his past eight years in office.
As for what to buy now, Stone says investors should stick with names which initially led the Trump rally.
"The Federal Reserve is likely going to hike we think twice, but you know they talk about three times. All the better frankly for the financials anyway. And, valuations are not aligned despite that big run and I think you see the same thing about energy," he said.
"I know on the surface energy looks expensive, but that's really because oil prices got destroyed. So, if we get some better oil prices certainly their profits will come around so their P/Es won't look nearly as expensive."
Plus, Stone believes fourth quarter earnings season, which just began, will exceed estimates. He argues this will give stocks another reason to defy the idea the rally is in trouble.