The shift from momentum stocks to value plays in recent days sends mixed signals about the overall state of the market, strategist Bob Doll told CNBC on Tuesday.
But the condition of the broader economy should mean the rotation will persist, at least in the near term, Doll said on "Closing Bell."
"The market was pricing a recession starting tomorrow morning, in my view," said Doll, chief equity strategist at Nuveen Asset Management. "We don't have a great economy, but good enough that we can rotate a bit. I think there are more legs to this rotational trade, assuming there is no recession anytime soon. And that's my working premise."
Doll said the S&P 500, which has in recent days crept back toward its all-time high of 3,027.98 hit in late July, hasn't been pricing in a recession as a whole. The benchmark finished narrowly positive Tuesday, closing up 0.03% at 2,979.29. Beneath the surface, with higher prices in the utilities and other defensive sectors and lower prices in machinery stocks, the market was showing recession fears, Doll said.
"That was saying, 'Economy, curtains,'" he said, but that sentiment is less clear now.
Merck, a defensive stock, closed down 2.1% on Tuesday, and Procter & Gamble dropped 1.9%. On the other hand, Macy's continued its strong showing since Wednesday, rising 5.7% on Tuesday to $17.10. Kraft Heinz also performed well in that same stretch, rising 3.1% on Tuesday.
While Doll said the recent market move sends mixed signals, others are taking a more definitive and negative view.
"The rotation, despite it being a positive signal in terms of investor macro sentiment, is probably a net negative for the overall SPX in that super-cap tech will likely be caught up in the selling and these stocks dominate the index weighting," Adam Crisafulli, executive director at J.P. Morgan, said in a note.
Additionally, Bespoke Investment Group suggested the sudden stock market shift toward the value names may indicate investors are betting on higher interest rates.
"Either equities are over-reacting to the recent move higher in rates, or they're predicting a more extended turn higher in yields," Bespoke analyst George Pearkes wrote.
Bond yields continued their uptick Tuesday, with the 2-year at 1.68% and the 10-year up to 1.73%. This may also lead investors to turn away from more defensive sectors toward the value stocks that are rising.
— CNBC's Fred Imbert and Al Lewis contributed to this report.