Round some of the biggest bulls on Wall Street are pulling in the reigns.
Phil Orlando, Federated Investors chief fair play market strategist, has moderated his optimism this year and next, reflecting a go of headwinds buffeting the stock market.
He anticipates 2900 on the S&P 500 by the end of 2018, half the help he had previously anticipated, though still an 8 percent gain. Orlando has also edited his 3,500 target on the S&P 500 for 2019 to 3,300.
In particular, one market risk is at the forefront of his disregard.
“The Fed is right at the top of our list,” Orlando told CNBC’s “Futures Now” on Thursday. “We’re refined with the quarter-point hike at the December FOMC meeting, we’re fine with another two-quarter-point hike, say, in the outset half of next year, but, at a 3 percent funds rate, we think we should be done.”
Orlando utters the likelihood of slower economic growth both in the U.S. and abroad warrants a discontinuation from the Federal Reserve at the 3 percent mark in the second half of 2019, and inappropriate 2020.
“But the Fed’s dot plots have them continuing to hike, bringing the funds sort up to about 3.5 percent in the middle of 2020,” added Orlando.
The Fed’s dot plan release in September suggests a fed funds rate of 3.1 percent for 2019, sense as many as three rate hikes next year.
“In our view that’s too much,” Orlando maintained. “The risk for the market is that the Fed over-tightens, we invert the yield curve, and we in point of fact create the recessionary environment perhaps in 2021 that the market and the Fed are maddening to avoid.”
The Fed will publish a new dot plot forecast at its December meeting. Customer bases are pricing in another 25-basis point hike at that meeting, according to CME Number fed funds futures.
The Fed isn’t the only risk on Orlando’s radar. He said other numbers, including uncertainty over a U.S.-China trade resolution, and the threat of a aggressive U.S. dollar impacting corporate earnings, continue to “dog the market” and push it take down.