These 2 Risks Are Keeping This Market Expert Up at Night
Federated Hermes' Phil Orlando believes two factors pose serious risks for equity markets, according to CNBC.
Orlando is bullish on the stock market but is concerned that the market isn't as stable as he would like.
- The presidential election.
He is concerned about the prospect of Joe Biden winning and whether the Democrats will take control of the White House and Congress. “What might fiscal policy regime change look like, if at all, come next year?” Orlando said on Friday. If the Democrats sweep, Biden's tax policies would get passed and eat into corporate profits.
- The coronavirus.
“We’ve already seen two spikes: The one that peaked in the middle of April, [and] the one that peaked in the middle of July. A lot of us are bracing for a third spike now that colleges are back in session,” Orlando said. “But to some degree it may be mitigated if we can continue to make good vaccine progress.”
He believes markets will continue to be volatile leading up to the election and that he sees the potential for a 10 percent correction. “Certainly, President [Donald] Trump’s Covid diagnosis... has amplified that,” he said.
His year-end S&P 500 forecast is 3,500. He believes the index could hit 3,800 by 2021 if Republicans maintain their majority in the Senate and the pandemic can be contained.
“There’s no question the Fed is all in,” Orlando said. “Chair [Jerome] Powell has told us that we’re going to keep the Fed Funds Rate anchored zero-bound through at least the end of calendar ’23. That could continue for another year or two after that.”