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If you're playing the 'what if game' with stocks, market watcher Zachary Karabell says you’ll sabotage gains

The biggest risk in the markets may be inside investors' heads.

Envestnet's Zachary Karabell isn't alarmed by White House chief economic advisor Gary Cohn's decision to resign, President Donald Trump's tariff threat on aluminum and steel or inflation ticking higher.

He's more worried about the investor overreactions to these events and daily "noise" in the markets dragging stock prices lower.

"There is always an 'Oh my God, what does this mean?' We all live in that world, so people do tend to react to that and play the 'what if game' and get worried because everyone else seems worried," the firm's head of global strategy said Wednesday on CNBC's "Trading Nation." "

Karabell, who is also a CNBC contributor, believes relentless fear and anxiety is preventing many investors from making the right decisions. He contends their concerns are heavily based on speculation.

"For the time being, almost none of this has manifested itself in how many iPhones Apple sells. Or does GE get out of its own morass or not," he added. "This is a period of very strong earnings, low levels of corporate debt and so on."

He also notes that much of the world is still enjoying a period of economic growth.

Karabell, who creates strategies for financial advisors, is predicting another positive year for the stock markets — barring any black swan events.

"If you're going to be in the markets, you have to accept there are certain chronic levels of risk," Karabell said. "The attempt to inoculate yourself against those is like not getting into a car because you know there's a possibility there's going to be an accident."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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