‘Extreme Over-Optimism’ Risk: Godfrey

While stocks are likely to grind higher in the near term, the likely ensuing pullback could offer buying opportunities, Gemma Godfrey of Brooks Macdonald Asset Management said Monday.

"The main risk in the U.S. earnings season is actually about overly optimistic earnings expectations in the second half of this year, so you just have to focus a little further out," she said. "And the reason behind that is that the numbers are still forecasting 10 percent growth in earnings over last year, in the same period as last year, and in the face of weakening economic data, this could give markets a reason to be a little bit shaky going forward."

On CNBC's "Fast Money," Godfrey said that she was still a believer in equities.

"Over the longer term, stocks are still the best place to be," she added.

Godfrey noted that negative economic data tends to be positive for stocks because of an expectation that the Federal Reserve will continue easing, while positive data also tends to bolster equities.

"This whole win-win sweet spot is driving markets," she said. "But our concern is to do with the fundamentals and is to do with the shakiness and how far we've rallied already in terms of this economic headwind that we're going to be seeing toward the second quarter and the second half of this year."

With traditionally defensive sectors becoming expensive, Godfrey said that she would be looking at individual stocks.

The stock market, she added, would likely grind higher, although it was "unlikely there is this catalyst for that next leg up."

As earnings expectations begin to moderate, there will be buying opportunities, Godfrey said.

"That will suddenly start feeding through and renew this optimism that we've seen so heavily in the first quarter."