- One of Wall Street's biggest bulls is highlighting two big risks that loom for the stock market.
- JPMorgan's Marko Kolanovic said escalating Russia tensions and a potential Fed policy error dent his enthusiasm for stocks.
- "Most of the risks in 2022 are a result of policies... it all amounts to throwing rocks in glass house," Kolanovic said.
JPMorgan's Marko Kolanovic has been a steadfast bull throughout the stock market's more than 20% decline this year, but now some big risks are forming that he can't ignore.
In a Friday note, he admitted that increasing risks from the Federal Reserve and Russia are putting his firm's 2022 price targets at risk, which includes an estimate that the S&P 500 will surge upwards of 30% from current levels to 4,800 by year-end.
"While we remain above-consensus positive, these targets may not be realized until 2023 or when the risks ease," Kolanovic said.
A Fed Policy Mistake
Kolanovic made it clear that under Fed Chairman Jerome Powell, the central bank doesn't have the best track record in avoiding policy errors. "Since 2018 we have seen several errors that increased macroeconomic volatility."
In the fourth quarter of 2018, the stock market plunged 20% in short order as the Fed got too aggressive in its tightening policies amid a looming recession in the manufacturing economy due to former President Trump's trade war with China.
That error was followed by the Fed easing too much during the aftermath of the COVID-19 pandemic, which gave rise to a 2021 bubble in cryptocurrencies, NFTs, and innovation growth stocks, according to the note.
"A potential hawkish mistake followed after a dovish mistake makes for two mistakes rather cancelling out," Kolanovic said.
Now it looks like the Fed is on track to committing another policy error as it remains steadfast in its goal of raising interest rates to tame inflation, even as some indicators show inflation has peaked and the economy is weakening.
Stock Market Outlook: Wall Street's Biggest Bull Says 2 Big Risks Loom (businessinsider.com)
