As Wall Street heads into the third quarter earnings season, Federated Hermes chief equity strategist Phil Orlando joins Market Domination Overtime to discuss what investors can expect.

Orlando believes that third quarter earnings will be "positive, but a lot slower" than the second quarter.

"Second quarter earnings were up about 11 or 12% year-over-year. The third quarter, which is going to start this Friday, that number is probably going to be up around 3 or 4%. So still positive, but at a much slower pace," he tells Yahoo Finance.

He expects earnings growth for Magnificent Seven stocks also to slow. While they rose 60% in the fourth quarter of 2023, Orlando anticipates growth between 15 and 20% in the third quarter. Meanwhile, the "stocks that have been left for dead," or the rest of the 493 stocks in the S&P 500 (^GSPC), should experience some growth in the mid-single digits.

"We're starting to see some improvement in earnings from the sectors that have done poorly and a material slowdown from this very narrow sleeve of growth technology names that did phenomenally well over the last year," Orlando summarizes.

With this slowing growth in tech, he encourages investors to play defense and invest in inexpensive areas of the market. "You've got low P/Es (price-to-earnings ratio), low betas, high dividend yields. So you've got small-cap names, you've got domestic large-cap value names. You've got international names with a particular focus on emerging markets. These sectors still offer terrific attraction," he says.

As the market faces seasonality issues and uncertainty around the election, Orlando emphasizes, "We just think that playing defense here for the next couple of months maybe may not be a bad strategy."

To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here.

This post was written by Melanie Riehl