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Stay Cautious as Earnings Season Begins

Caution continues to be the driving theme as earnings season kicks into gear this week.

First-quarter profits are expected to be disappointing at best, and investors warn the market rally we've seen of late could fizzle out.

"At these sort of levels I think the valuations are pretty demanding and in the context of the economic backdrop and the problems we’re seeing in financials...people just need to be cautious about how we might go," advised James Falkiner, director & CEO of Falkiner Global Investors on CNBC Asia Pacific's Protect Your Wealth.

Sectors like cyclicals, homebuilders, some retailers and airlines have enjoyed solid runs in the last few weeks, Falkiner noted. But amid the rally, he warned investors should be very cautious right now, adding that it is better to be late to the party, than early.

Falkiner also advised investors to avoid U.S. financials that are systemically important and have a large exposure to the consumer market. He named Citigroup, Bank of America and Wells Fargo as examples.

"The risk we run is if the U.S. government ends up holding very significant portions of these banks. We’re not talking about outright nationalization but rather just significant proportions, the market will tend to discount the valuations to reflect that dichotomy in the ownership structure," Falkiner explained.

He also said that holding high levels of cash is a good bet right now.

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Catch "Protect Your Wealth" on CNBC's Asia Pacific network every Tuesday on "CNBC's Cash Flow," Wednesday on "Asia Squawk Box" and Thursday on "Capital Connection."