Trade war tensions and Twitter 'noise' are sparking volatility in an otherwise healthy economy, leading strategists say 

  • Economic fundamentals are healthy, but distractions, such as trade war tensions and President Donald Trump's daily tweets, may be taking a toll on the markets, leading strategists told CNBC on Monday.
  • Peter Andersen, owner of Andersen Capital Management, and Art Hogan, chief market strategist for B. Riley, weigh in on healthy economic fundamentals and the volatility of the market.

Economic fundamentals are healthy, but distractions, such as trade war tensions and PresidentDonald Trump's daily tweets, may be taking a toll on the markets, leading strategists told CNBC on Monday.

"If not for trade policy and concerns over trade war and tariffs, the market would be doing much better. The fundamental backdrop is a lot better than what the market looks like right now," Art Hogan, chief market strategist for B. Riley, said on CNBC's "Power Lunch."

J.P. Morgan Chase chief Jamie Dimon made polarizing comments on Saturday that the yield on the benchmark 10-year Treasury note should be 4 percent today and people "better be prepared to deal with rates 5 percent or higher."

Amid market volatility stoked by U.S.-China trade tensions, Dimon's remarks reflect his belief in a stronger economy, despite the yield struggling to stay above the 3 percent level.

Peter Andersen, owner of Andersen Capital Management, agreed that the economy is stronger than the market may be letting on, and that hype surrounding a U.S.-China trade war, including the president's sometimes market-moving tweets, could be negatively impacting stocks.

"Maybe we can actually decouple the U.S. economy, if I dare say so, from all the noise that we're seeing. The day-to-day changes, the tweets, etc., make investors really uncomfortable with the direction the U.S. economy is going in," Andersen told CNBC.

"For Mr. Dimon to zero in on the U.S. treasury rates I think is pretty smart, because I think what he's implying is, while we've got all this noise going in this three-ring circus, in the center ring the U.S. economy looks pretty good," he added.

Hogan echoed Dimon and Andersen's sentiments that the fundamentals are good but shied away from their bullishness, citing fears tensions could drag on for longer than anticipated.

Hogan said the Trump administration is leaning on a strong economy to accomplish its objective of fairer trade policy and that the administration "might as well do it when the economy is strong."

And as Hogan predicts trade war tensions may "drag out longer than just the fall," he recommended investors take a different approach to stocks as they ride out the bull market than they did when they entered it.

"I think ... we're probably correct in thinking that what got us here probably doesn't take us out," Hogan said.

"To avoid or at least to shelter yourself from some of the volatility around trade, I would stay small and domestically focused and avoid the large multinationals until this settles out," he added.

Hogan recommended investors avoid the FAANG trade and predicted the Russell 2000 will outperform the S&P 500.

Joe Duran of United Capital Financial Advisers went so far as to suggest the markets are due for a 15 percent correction, which he called "increasingly more likely as we get further from the tax cuts."

"I think for the next six months you want to be in defensive names. Still participate, still be long, but be prepared for more noise than we've had in the last few years," Duran told CNBC's "Power Lunch."

The U.S. has imposed tariffs on $34 billion in Chinese imports, which were met with retaliatory charges by China. After Trump instructed U.S. Trade Representative Robert Lighthizer to consider raising tariffs on $200 billion in Chinese goods to 25 percent from 10 percent, the Chinese Ministry of Commerce responded with a retaliatory threat on Friday.