Invesco's Kristina Hooper is worried overzealous investors are getting swept up in market momentum.
Whether it's optimism or pessimism, she warns they're becoming dangerously overconfident about where the market is heading next.
"People have become very set in their opinions. Some believe that there's no end in sight to the stock market rally," the firm's chief global market strategist told CNBC's "Trading Nation" on Monday. "Others believe that because we continue to hit new highs, things are getting quite frothy."
Hooper observes that more and more investors, particularly on the retail side, are making risky one-sided bets off their polarized market views. She believes it's a major trap that will result in deep losses.
"There's some speculative fervor in markets, and it's similar to what we've seen with bitcoin," said Hooper, who added it also shows similar characteristics to the excitement surrounding the late 1990s tech bubble.
Hooper, who oversees $1.1 trillion in assets, views the rising popularity of no-fee online trading platforms such as Robinhood as creating more access to the markets and contributing to enthusiasm among retail investors.
"It's always great to see more investors come into the market," she said. "Just hopefully, we can remind them of important long-term investing tenets like diversification."
Due to a lack of visibility because of the coronavirus's ultimate path and the upcoming presidential election, Hooper is advising clients to have a 12 to 18 month time horizon and to use a barbell approach to investing. She recommends growth stocks on one end and value on the other.
"We don't know exactly how this economic recovery plays out," Hooper said. "The most important thing we need to be focused on is being well diversified."
On Monday, the S&P 500 hit another all-time high and closed above 3,400 for the first time ever. The Nasdaq also saw a strong performance. The tech-heavy index recorded its 37th record close so far this year.