(Bloomberg) — Stocks have yet to feel the full impact of risks from elevated inflation, Federal Reserve policy tightening and geopolitical tension.
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So argues Philip Orlando, chief equity market strategist at Federated Global Investment Management Corp., who is braced for another leg down in equities in coming weeks and months and indicated “playing defense” is a priority.
“It’s not just geopolitical risk — you’ve got this spike in inflation to 40-year highs,” Orlando said in a Bloomberg Television interview. “We are bracing for a significant hawkish change in Federal Reserve policy. We’re probably a month away from getting some more detail on that.”
Investors have increasingly sought shelter in shorter term, cash-like assets amid trepidation about looming Fed interest-rate hikes.
Russia’s increased military presence near Ukraine has added to market trepidation. Orlando sees further geopolitical uncertainties brewing over China and Taiwan as well as talks toward a nuclear accord with Iran.
The S&P 500 index has dropped almost 8% this year but has still almost doubled from the pandemic lows of March 2020. In that context, a drop of 10% or 20% is “probably a healthy correction,” Orlando said.
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