Bryn Mawr's Jeff Mills sees few options for investors looking for big second half gains.
Due to the country's coronavirus surge, he predicts economic setbacks will start to meaningfully impact some of the summer's most profitable market groups.
"We're past the point where every single data point is going to be ahead of expectations," the firm's chief investment officer told CNBC's "Trading Nation" on Friday. "Now, we're just looking to see where things plateau."
Mills, who has $17 billion in assets under management, warns economically sensitive stocks have the most to lose.
"As economies have started to close down again, you're starting to see the economic recovery re-moderate," he said. "That could be difficult for some of those cyclical areas of the market that have been supportive. So, at this point you wonder what is going to take us higher."
Over the last three months, small caps, mid-caps and industrials have been outperforming the broader market. The momentum has been based on the notion a V-shaped recovery would act as a positive driver.
With the backdrop changing, Mills speculates large cap technology trades may look safer despite some frothy characteristics.
"People will probably default back to areas that are showing any level of earnings growth," said Mills, a CNBC contributor.
"The problem is those areas are quite expensive, and so I don't know how much gas is left in the tank, added Mills. "A lot of those names have been priced for perfection."
So, his top strategy involves a more defensive S&P 500 group: Consumer staples.
"It's broken up above the 200-day moving average," he said. "The dollar probably continues to deteriorate, and staples has the third highest international exposure. And, you've also seen massive outflows from staples lately. So, a little bit of a contrarian view."
As for the broader market, Mills expects a lot of choppiness exacerbated by the uncertainty involving the upcoming presidential election.
"It's going to be more sideways trading, more volatility," Mills said. "That's likely the order of the day for at least for at least the foreseeable future."
Disclosure: Jeff Mills owns a long position in Microsoft, Costco, Walmart and General Mills.
Correction: A previous version of this story included a disclosure that misstated Mills' holdings. The disclosure has been updated.