Federated's Steve Chiavarone, one of market’s biggest bulls, is taking a ‘few chips off the table' ahead of an impending sell-off 

One of the market's biggest bulls is on sell-off watch.

Federated Investors' portfolio manager Steve Chiavarone sees a 5 to 8 percent drop in stocks before summer ends. And, he thinks it may have already started.

"We've taken a few chips off the table," the portfolio manager said Friday on CNBC's "Trading Nation," and he cited uncertainty as the overwhelming reason why.

"On average, midterm election years have pullbacks, particularly in the summer months," Chiavarone said. "Big trade rhetoric is going to continue to be hot."

He also suggested September's Federal Reserve policy meeting on interest rates may become a flashpoint for Wall Street.

"We're due for another hike so markets may have a little bit of concern about that particularly with a relatively narrow yield curve," he noted.

But if a summer sell-off strikes, Chiavarone suggested he won't be making any changes to his S&P 500 Index year-end price-target of 3,100 — a gain of almost 9 percent from current levels. He believes the market will snap back.

"Our view is that growth is going to remain strong, inflation is going to surprise to the downside, [and] the Fed will hike less in 2019 than we expect. That'll allow markets to melt up," he said.

Chiavarone added he'd look to redeploy his "chips" as the fourth quarter gets closer.

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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.

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