Investors are bailing on a popular trade due to the coronavirus surge.
Allianz Global Investors' Mona Mahajan finds a rush of money is flowing back into stay-at-home plays.
"The cyclical story is on hold for now," the firm's U.S. investment strategist told CNBC's "Trading Nation" on Thursday. "The trade is moving out of that reopening, cyclical trade which was more about sectors like airlines [and] hotels."
Mahajan attributes the shift to investor fear and uncertainty regarding the country's ability to contain the virus.
Despite the setback, Mahajan is optimistic.
"It's not dead forever," she added. "There are a few things that could reignite it."
She lists a vaccine that becomes widely available, evidence virus cases have peaked and a resolution to the November presidential election.
"Historically when elections are done, presidential elections in particular, markets tend to breathe a sigh of relief regardless of which party wins because that uncertainty is behind us," noted Mahajan.
According to her base case, stocks should grind higher in the year's second half. But due to seasonal pattern, virus and elections risks, she predicts it'll be a volatile environment for stocks over the next few months.
"That time period in September and October has not been great for markets," said Mahajan. "This year, it happens to coincide with one: school reopenings and potentially, what we're hearing, of another flare-up in virus cases."
To cope with uncertainty, Mahajan favors a barbell approach to investing and looking to China and Europe — two regions that are reporting progress against new virus outbreaks.
"There's room to be a little bit more diversified," said Mahajan, who views market downturns as a buying opportunity.