The stock market highs for the year are almost in, warns Wells Fargo strategist

Traders work on the floor of the New York Stock Exchange.
Michael Nagle | Bloomberg | Getty Images
Traders work on the floor of the New York Stock Exchange.
  • Investors should start looking at value stocks but "we don't want you to rush into it — it's a walk-not-run-type situation," says Wells Fargo's top equity strategist Chris Harvey.
  • Companies should start to lower guidance, "but as we go forward that's where the value is and that's where the opportunity is," he says.
  • Value companies have "been a proxy for risk. Now you're seeing value as an opportunity," he says.

The stock market highs for the year are almost in, Wells Fargo strategist Chris Harvey told CNBC.

He said investors can move on some value stocks like industrials and tobacco but should expect mid-single-digit percentage returns on the S&P 500 this year.

"You have to tread lightly," the bank's head of equity strategy said Monday on "Fast Money." "We don't want you to rush into it, it's a walk-not-run-type situation."

While the U.S. economy remains relatively positive, markets have been worried that global economic growth is slowing, particularly in China and Europe.

Harvey argued that companies should lower guidance because estimates are too high. He has set a year-end price target of 2,665 for the S&P index, about a 7.6 percent climb from the start of the year and just under 1 percent higher than its Monday close.

"We want those expectations to come down, but as we go forward, that's where the value is and that's where the opportunity is," Harvey said.

Value stocks tend to trade at a lower price compared to their fundamentals. Harvey also suggested looking at real estate investment trusts, capital goods, software and food and beverage companies.

Harvey is pulling away from transportation and semiconductors.

"We're doing a lot of intra-industry trades and a lot of one-off trades because some of these situations are very idiosyncratic" and "it's more of a stock picker's market than last year," he said.

"We've been saying that value companies have really been a proxy for risk," Harvey continued. "Now you're seeing value as an opportunity."

The S&P 500 dipped to 2,643.85 on Monday, ending a three-day win streak. The index is up about 5.4 percent this year.

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