Jake Jolly, BNY Mellon Investment Management's head of investment analysis, urged caution Wednesday in response to the recent stock market rally, citing lagging sectors and the institution's expectations for a recession.
In a recession, the S&P 500 could fall below 4,000 and test its October lows, he said on CNBC's "Squawk Box."
"We are certainly cautiously optimistic, is kind of the nicest way that I can put it," Jolly said. "We're very skeptical that this is a sustainable new bull market rally."
He called the rally "very narrow" and noted financial stocks are lagging. While the equal-weighted S&P 500 index has started to improve, it has lagged much of this year, especially since the regional banking crisis in March, Jolly said.
Market dynamics, paired with BNY Mellon's near-term macro-economic expectations, drive the firm's skepticism about a bull market, he said.
"We think that you need to be very cautious about this rally and definitely pick your spots. This is not the time to sort of just blindly buy the index," Jolly said. "This is unlikely to be the start of the next bull market. … We think that there is going to be pressure on equities in the near term."
