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Market's 'most critical' risk is the trade war, PNC warns

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'Volatility is going to stay heightened for quite some time,' PNC says

Without a U.S.-China trade war resolution, market rebounds are doomed, PNC Financial's Amanda Agati says.

According to the firm's chief investment strategist, investors won't be able to catch their breath until White House policy issues get settled.

"The single most critical issue or risk for the market and really the global economy is the trade policy and uncertainty coming out Washington," she told CNBC's "Trading Nation" on Monday. "This really is a Groundhog Day scenario that keeps playing out. ... There's pressure applied on the Fed. We get a series of [President Donald Trump] tweets. We get a market sell-off. We get the administration walking it back, and it's a rinse and repeat."

Stocks kicked off the week strongly in the green, but they're still on pace for their second negative month of the year. Monday's bounce happened after Trump indicated at the G-7 summit that China is looking to get back to the bargaining table.

However, Agati doesn't believe the rebound will stick.

"Hard to see that there's really fundamental change and measured progress towards a trade deal here," Agati said. "The bottom line is that volatility is going to stay heightened for quite some time until we really get a clear sign of a deal or at least some sustained trade peace."

The market's wild swings aren't pushing her to the sidelines. She's using the volatility to reposition portfolios on days the market is struggling.

According to Agati, the key to investing in this volatile environment is to have an iron stomach and a time horizon of at least 18 months.

"There are pockets of opportunity developing in the emerging markets and even to some degree in mid- and small-cap domestic equities," Agati said. "The connection between them is really the fact that they're all being wrapped up in this trade uncertainty."

She liked emerging markets last January, too. The iShares MSCI Emerging Markets Index, which closely tracks the group, is down almost 13% over the past two years. So far this year, it's flat.

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This is PNC's 'most critical' risk to the stock market