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After Dow's best day since 1933, $15 billion fund manager urges caution

Stay defensive as markets rally, warns $15B fund manager

Stimulus hopes on Tuesday gave U.S. stock markets a shot of adrenaline. 

The Dow Jones Industrial Average rallied more than 11%, its best daily percentage gain since March 1933. The S&P 500 climbed 9%. 

David Spika, president of GuideStone Capital Management, who oversees $15 billion in assets under management, told CNBC's "Trading Nation" that it's still too early to get bullish on the market again. 

"It's positive, it's optimistic and encouraging to see the market rallying," Spika said of Tuesday's massive gains. "That said, there's still a lot of bad news on the horizon whether that's rising COVID-19 cases or earnings and economic disappointments, so we need to be a little cautious here."

Damage to the economy tied to supply and demand disruptions is expected to show up in coming months' data. St. Louis Federal Reserve James Bullard warned that unemployment could climb as high as 30%.

"I don't think there's any question we're already in a recession. We're going to see unemployment climb through the roof. We're going to see job losses and companies closing," said Spika. "The real question now is how long does it last. And I think that'll be a function of when we start to see a peak in COVID-19 cases or if there's a vaccine produced. At that point in time, I think we might see some normalcy come about regarding people's daily lives and economic activity."

Until then, Spika said it serves to be cautious and invest in areas that can weather economic downturns.

"It's important to continue to stay defensive and, by that, I mean high-quality companies with strong balance sheets, with earnings visibility that tend to be lower beta and those companies are lagging [Tuesday] but over time, they're going to outperform as we work through this difficult process," said Spika.

Even if markets form a bottom here, Spika warns of a long period of volatility before the dust settles. He favors defensive sectors such as consumer staples and health care as well as grocery chains such as Walmart that should outperform under the stay-at-home orders in the U.S.

"Then, certain technology companies that are really benefiting from the working from home, and from people having free time or having to access technology tools from their homes … I think these are places, these are the kinds of companies that will continue to do well," he said.

The XLP consumer staples ETF, and XLV health care ETF underperformed the market on Tuesday. The XLK technology ETF led broad market gains.