"Our base case for the rest of the year is more volatility," said David Lebovitz, global markets strategist at J.P. Morgan Funds. "It's going to be smaller moves like we've seen recently, which characterize the remainder of 2015."
On Friday, the S&P 500 rose just 0.08%, but that was enough to push to broad index to a new record close of 2,122.73. The index has moved higher 3.3% year-to-date. Amid more volatility, Lebovitz still thinks stocks can eke out gains of a few more percentage points by year's end.
"I think investors are still searching for that next big catalyst for whether the move is going to be up or down," Lebovitz said. "The volatility we've seen so far this year is indicative of the fact that investors are trying to figure out whether markets are headed higher or whether we may be headed for a bit of a rollover."
Lebovitz continues to prefer cyclical sectors like technology and consumer discretionary. "We think those sectors are going to be the big outperformers, particularly as we see wage growth pick up this year."
Lebovitz expects financials to see some tailwinds in a higher rate environment.
The Federal Reserve is looking to hike short-term interest rates, which have stood close to zero for over six years, in an effort to revive the economy after the financial crisis. While Lebovitz thinks higher rates will most likely be announced at the central bank's September meeting, he said the Fed might pull the trigger during its June meeting, although the probability is less likely.
"Traditional banking -- saving and lending -- should benefit from higher rates," he said."
That's largely because increased targets on the fed funds rate should eventually raise borrowing costs for consumers. That means better margins for banks on loans.