Markets are back in rally mode, that is until a tsunami of surprisingly bad economic news this summer — thanks to the U.S. trade war with China — washes over the heads of shell-shocked investors.

“What you have seen around the world and in the U.S. is data start to slow. I think part of that is certainly related to the trade tensions you have seen percolate around the globe. But you are also seeing weakness out of China, which has extended the time you will see a cyclical rebound,” veteran portfolio manager Erin Browne at Pimco warned on Yahoo Finance’s The First Trade.

The long-time strategist is right to stay laser focused on souring economic data and what it could mean for stocks. Without question, the market has overlooked a poor read on the U.S. jobs market for May (which marked a noticeable deceleration from April and the long-term trend) and a tame consumer price index (minimal inflation could mean U.S. growth has slowed further from the first quarter).

Meanwhile, defensive areas of the stock market such as Walmart (on fire the past five sessions) continue to catch bids. On the other hand, high-beta chip stocks like Advanced Micro Devices (AMD) and Nvdia (NVDA) have come under pressure lately on fresh concerns the trade war is stunting demand for products.

“We are still quite cautious on the broad market,” says Miller Tabak strategist Matt Maley.

Now this barrage of negative data has investors putting pressure on the Federal Reserve to slash interest rates as soon as July. Color me an old market watcher, but when the Fed cuts interest rates it’s often a sign the U.S. economy isn’t doing as well as many expected.

Browne points out she has been hesitant recently to buy the dips in the market (which others in the market have clearly done in June following an ugly May). Further, Browne has positioned her client portfolios more defensively.

“The weakness is important because I don’t think the market is factoring into expectations that growth is likely to continue to slow,” Browne added. “I think that sets up a negative backdrop as we look over the next couple of months.”

Brian Sozzi is an editor-at-large and co-host of The First Trade at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi

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