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Virus relief delay puts Crossmark's Victoria Fernandez on alert, warns it could a spark painful economic setback

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Top market watcher warns recovery may be on verge of a setback

A top market watcher warns the economic recovery may be on the verge of a setback.

Crossmark Global Investments' Victoria Fernandez blames the coronavirus relief delay on Capitol Hill.

She's concerned it'll push families who are depending on additional unemployment insurance and support to tighten their purse strings even more.

"That consumption number is going to slow down," the firm's chief market strategist told CNBC's "Trading Nation" on Friday.

Senate lawmakers left for recess last Thursday without passing a stimulus package, and they don't return until after Labor Day.

To help Americans cope with the impasse on the Hill, President Donald Trump signed several executive orders on August 8 to extend key relief programs. But the move faces legal questions because Congress controls federal funding.

"It makes it a little bit more vulnerable for the sheer fact that priced into the market at this point is another stimulus package," said Fernandez. "Everyone, including myself, anticipated that we would see a package come to fruition prior to the Senate leaving for recess."

Fernandez contends the stalemate is the major reason preventing the S&P 500 from hitting all-time highs. On Friday, the index closed 0.6% from a record.

"We keep bumping up against that 3,386 level," she noted. "If we don't get a package that comes through, a stimulus package, then I think we can expect to see a kind of mid to high single digit [percent] pullback."

Fernandez, who oversees $4.9 billion in assets under management, has been in the cautious camp. In early June, she warned weak consumer spending overtaking the virus was the biggest market risk.

'We're actually trimming a little bit'

She has been taking a barbell approach to stocks to address the challenges.

"You need to have that balance in your portfolio," she said. "We're actually trimming a little bit... some of those names that have had such a high run." 

Fernandez gives Apple and Microsoft as examples.

She's still avoiding big market bets, but Fernandez indicates there are pockets that look attractive.

"We like the 5G and the cloud and the data infrastructure on all those names that we think have longer-term trends built into them because of Covid-19, and what has happened," said Fernandez. 

She is finding additional opportunities among staples and cyclicals, particularly Walmart — which is scheduled to report quarterly results on Tuesday. 

"We're going into Walmart. I mean a good, solid name, we think, has some advantage with Wal-Mart+ coming online," Fernandez said.

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Virus relief delay could spark painful setback: Crossmark's Victoria Fernandez