Futures Now

Correction could wipe out record gains before year's out, Invesco top market watcher warns

Stocks vulnerable to 5-10 percent pullback, Invesco's top market watcher warns
Stocks vulnerable to 5-10 percent pullback, Invesco's top market watcher warns

Invesco's Kristina Hooper is confident September will build on August's all-time stock market gains — even though it's historically known as the year's worst month for the major averages.

However, that's where the record run may end.

According to Hooper on CNBC's "Futures Now," a correction could hit stocks as soon as next month.

"Think of it as something analogous to what we saw in February. So about a 5 to 10 percent sell-off," the firm's chief global market strategist said Tuesday.

She's predicting the downdraft due to trouble brewing on the trade and economic policy fronts.

Right now, Hooper said, U.S. assets are very attractive to investors because there's an assumption the U.S. will likely win the trade war. She is not in that camp.

"It is a significant issue even though investors, for the most part, have really tried to ignore it," Hooper said. "The U.S.' current trade policy is one that really runs counter to global growth, and could, in fact, also impact U.S. economic growth ... We have a lot of economic policy uncertainty that could tamp down capex [capital expenditure] and could tamp down hiring plans."

She calls herself "risk aware" — a cautious bull, of sorts. If her sell-off prediction materializes, Hooper says, a "swift recovery" would take hold, and it would be a buying opportunity.

"For those with a very long time horizon, they probably should stay put, and stick with their long-term plan," Hooper said. "For those with a short time horizon, this, of course, is the time to get more tactical."

She recommends overweighting domestic technology and small-cap stocks while monitoring the situation closely.

But her forecast comes with a caveat: A recovery may not push stocks back to early September levels. Hooper's year-end price target is 2850 to 2950. The index closed at 2896.72 on Tuesday.