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How experts are positioning themselves for the second quarter

Michelle Fox

As the second quarter gets underway, investors should continue to look at risk assets — they will just have to be selective, experts told CNBC on Friday.

The stock market posted strong gains in the first quarter , with the Nasdaq (NASDAQ: .IXIC) recording its best quarterly performance since 2013.

Gabriela Santos, global market strategist at JPMorgan Asset Management, credits the market's strength to the global reflation trade rather than President Donald Trump and his pro-growth agenda.

"It's a pickup in economic data around the world and that is still very much the case. So as we go into the second quarter, that's the main factor we're watching," she said in an interview with " Power Lunch ."

Therefore, Santos is still positioned in risk assets, including some of the cyclical sectors that didn't do as well as expected like financials.

And she thinks that the reflation trade can still be strong enough to propel stocks higher even if the Trump agenda fails, although the magnitude of the move will likely be different.

"We expect earnings to continue trending up, the economy to be fine. But we're talking about 5 percent earnings growth here without any corporate tax reform in the U.S.," Santos said. "So we have to be selective and we have to think about international as well."

In fact, she expects international stocks to outperform in the next few years.

Abhay Deshpande, founder and chief investment officer of Centerstone Investors, agrees.

His focus is purely on the fundamentals and that points to markets outside of the United States, he told "Power Lunch."

"The U.S. market has massively outperformed international markets but now there is a steep valuation difference between U.S. and non-U.S. markets," he said.

"We believe that the S&P 500 (INDEX: .SPX) is essentially at its intrinsic value. The opposite is the case for non-U.S. developed markets, which we believe are trading at significant discounts to intrinsic value," he added.

He likes Europe and Asia, but is less interested in Japan right now.

For those domestically focused, investors should stick with companies that have top-line revenue and earnings-per-share growth, which is difficult to come by in this environment, said Michael Arone.

In that scenario, he thinks technology is a "clear winner."

"I also think that in a market where it's really hard to find compelling values, you want to find some things at are inexpensive. And I do think that financial and energy kind of meet that criteria," the global market strategist at State Street Global Advisors told "Power Lunch."

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