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Trying to predict the market off the escalating trade war is 'truly insane,' Wall Street bull Tony Dwyer says

VIDEO2:2902:29
Insanity is behind market pullback, Wall Street bull Tony Dwyer suggests

Canaccord Genuity's Tony Dwyer sees a misguided strategy spreading on Wall Street.

He warned investors in a new note that making market decisions based on the next move or tweet in the U.S-China trade war is "truly insane."

According to Dwyer, trouble would have surfaced with or without escalating trade tensions due to overbought market conditions.

"If it weren't the trade issue, it would have been something else," the firm's chief market strategist told CNBC's "Trading Nation" on Monday. "Any time that you get kind of everybody standing on one side of the boat, they tend to have to shift to the other side."

The trade war escalation helped sparked a turbulent start to the week. The and Dow had their worst days since Jan. 3. The S&P is now 5% below its all-time high hit on May 1, and the blue chip index is down 6% off its record high.

But Dwyer, who has been predicting a 3% to 5% pullback for weeks, believes most of the pain has now filtered through the market.

"You are seeing signs of a little bit of excessive selling on the very near term," he said. "We are pretty much there on a news-driven event."

His S&P year-end price target is 2,950, 5% below current levels. Trade deal or no trade deal, Dwyer contends the market will regain its footing in the second half of the year and rally — citing low interest rates and the potential for a Fed rate cut to spur more economic growth.

"This entire bull run has been about slower growth," said Dwyer. "That will allow the Fed room to cut rates which will steepen the yield curve."

VIDEO4:3004:30
Trade war developments sparking 'insanity' in market, Tony Dwyer suggests