Avalon Advisors' Bill Stone sees stocks hitting record highs this year, but getting won't come without trouble.
"This is as good as it gets, at least in the short run," the firm's chief investment officer said Monday on CNBC's "Trading Nation."
Stone, whose firm has $8 billion in assets under management, expects a near-term pullback to strike stocks — citing the recent rally's "torrid pace" as a major reason.
"This rebound ranks as the strongest non-recession rebound in the first sixty days," Stone wrote in his weekly note.
And, that's why he believes the rally is getting long in the tooth.
"It's time to think about getting a little bit more defensive," Stone said. "When you look at it in history, it certainly looks like we're ahead of ourselves."
If the market begins consolidating, Stone said, he would consider buying energy, health care and consumer discretionary names first. Plus, he would tone down exposure to groups such as semiconductors and financials, which have been firmly in rally mode.
According to Stone, the pullback won't hit as hard as the corrections did in 2018. However, he expects it to be big enough to rattle Wall Street, at least for the near term.
"The good news is when you kind of stick with that theme of the nonrecessionary times, one year out after the bottom, you're typically up 28 percent," he said.
"Valuations still look pretty good," Stone said.