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.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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