Phil Orlando, a long-term bullish market, issued a 10% correction warning.
Federated Hermes’ chief market strategist warned that uncertainty surrounding fiscal and monetary policy will prevent the market from breaking recent conventions.
“In the next five weeks or so, another shoe may fall off,” Orlando told CNBC. “Trading country“Monday. “We see how events here develop and evolve. “
Orlando made a callback observation in midsummer. He sees signs that 5% to 10% of air pockets are forming, which he estimates will hit stocks between August and October.His troubles from Inflation is higher than expected arrive Covid variant.
According to Orlando, these risks still exist, but Washington’s policy is now preparing for a major setback in the stock market.
“In terms of monetary policy, inflation has always been much higher than the Fed, and the government has been predicting,” he said. “We believe that inflation is more sustainable. This will cause the Fed to change its monetary policy in terms of downsizing and interest rate growth, which is much faster than they initially told us.”
He is also worried about potential changes in the Fed’s helm. The term of Chairman Jerome Powell (Jerome Powell) will end in January. The expiration of his term gives President Joe Biden the opportunity to replace the person appointed by President Donald Trump.
Orlando also listed legislators’ debates on debt ceilings and trillions of infrastructure spending as major market resistance.
“This is a very critical week,” he said. “All these discussions are constantly changing, so any combination of these developments in Washington could cause the stock market to fall again.”
Orlando warns that this background has allowed trade to grow, including Big technology, Especially fragile.
“If we think that some of these events will cause 5% to 10% of air pockets to appear is correct, then we believe that technology stocks may be disproportionately hit,” Orlando said. “Maybe this will result in a 10% to 20% downside.”
Instead of technology, he will focus on buying stocks that are related to economic recovery and have pricing power against weakness.Orlando especially likes vitality, finance, industry, Consumer discretion, Material, Small-cap stocks And international developed markets.
“There is a huge catalyst to drive their earnings and growth, and they have fallen behind technology stocks- Growth stocks -Quite important,” he said. “A catch-up deal is coming. “
Although Orlando issued a recent correction warning, He has higher expectations For the end of the year.Orlando Standard & Poor’s 500 Index The year-end goal is 4,800 people, and his forecast for the end of 2022 is 5,300 people.