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Inflation, Delta Risks to Cause Equity Inflection Point

With Wall Street reaching an important “inflection point,” Phil Orlando, a longtime market bull, is preparing for a rough growth.

Federated Hermès Chief Equity Market Strategist blames risk dynamics. Orlando not only sees hotter-than-expected inflation and Covid-19 Delta variants as obvious problems, but is also concerned about the uncertainties surrounding monetary and fiscal policy.

He told CNBC’s “Trading Nation” on Monday. “We have entered a period of seasonal instability historically, and at the same time a lot of things are gathering,” he said. “We have this surge in inflation. We have a question about what the Federal Reserve does from a policy perspective. We have this debt cap issue coming later this week.”

Wall Street doesn’t seem to share his concerns. On Monday, the S & P 500, Nasdaq and Dow closed at record highs. Record activity takes place the day before the Federal Reserve Board prepares to convene for its policy meeting.

Orlando, which oversees $ 625 billion in assets under its control, suggests that investors will soon receive a wake-up call.

“The stock market was incredibly strong. It literally doubled from the bottom of the pandemic’s lowest price — March a year ago,” said Orlando, who warned that the valuation was bubbling.

The S & P 500 has risen 18% so far this year. According to Orlando, the index is significantly vulnerable to a 5% to 8% pullback over the next two months. The year-end target for his S & P 500 is 4,500. The index closed at 4,422.30 on Monday.

“We’re less than 100 points away from our year-round goal,” he said. “Our view is that volatility and chops can occur as markets are integrated to surround all of these concerns and issues.”

Orlando calls the underlying economic and market fundamentals so strong that he will take advantage of his weaknesses as a buying opportunity. His favorite market capitalization is large domestic stocks with an emphasis on finance, energy and consumer discretionary stocks.

“It was those circulating stocks that we left for the deadback in the spring of 2020,” said Orlando. “It [the recession] Ended in April of last year, the market now needs to keep up with prices in these very strong earnings and revenue growth we are seeing. “

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Inflation, Delta Risks to Cause Equity Inflection Point

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