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Illustration: Sarah Grillo/Axios

Investors entered 2021 concerned about the transition to a new U.S. president, the form of new fiscal stimulus, the distribution of vaccines and the reopening of the economy. Now, top risks include supply chain bottlenecks, labor shortages, inflation and slower GDP growth.

Why it matters: Stocks have rallied almost unabated for over a year, leaving many to wonder if the market is overdue for a big selloff. Last week's declines amplify those concerns.

Catch up quick: The transition to a new president was anything but smooth, but it happened. Fiscal stimulus has been passed, vaccines are being administered widely and the U.S. economy has been surging.

What to watch: There are two big dynamics to monitor in the second half, Credit Suisse strategist Jonathan Golub tells Axios.

  • First, how long does the demand for goods and services outstrip supply, keeping inflation hot?
  • And second, what is the path to a more normal pace of growth?
  • Persistent inflation and a disorderly slowdown are a recipe for market volatility.

What they’re saying: With the S&P 500 near its all-time high of 4,257, strategists have noticeably diverse views on what’s next.

  • Credit Suisse's Golub is bullish, predicting the S&P will rally to 4,600 by year-end amid what he calls a “benign deceleration” in growth. That's where the economy cools to modest-but-healthy growth and the market generates modest-but-healthy returns.
  • RBC strategist Lori Calvasina is more cautious, telling Axios she sees "a little more room for stocks to move up but not a lot." We could see "a meaningful pullback during the second half, amounting to as much as 8%-9%," she says.
  • Among other things, Calvasina cautions that measures of investor sentiment and positioning are at levels that signal the market has peaked — and is about to slide.

BofA strategist Savita Subramanian supplies the more bearish take. She thinks the S&P will fall to 3,800 by year-end.

  • Similar to Calvasina, she warns in a research note that investor sentiment is near-euphoric, but also notes wage inflation and potential tax hikes could hurt earnings.

The bottom line: "The stock market is not in a place where it can absorb bad news," Calvasina says.

Go deeper: Investors still view COVID as a market risk for the second half of 2021

Go deeper

Dan Primack, author of Pro Rata
Sep 27, 2021 - Economy & Business

Economists set 2021 sights lower

Business economists have tempered their 2021 growth expectations, cutting nearly a point off their annual GDP forecast since earlier this year, according to the NABE outlook survey released Monday.

Why it matters: This reflects increased concerns over the pandemic's impact on the economy, particularly due to the spread of Delta and other variants. Panelists said that a faster vaccine rollout could improve their outlooks.

Updated 24 mins ago - Science

Blizzard likely to hit New England this weekend as "bomb cyclone" forms

Computer model projection of the precipitation and wind field from the weekend storm in the Northeast. (Earth.nullschool.net)

A powerful blizzard is likely to strike parts of New England and the Mid-Atlantic beginning Friday and lasting into the weekend, with snow totals that are likely to be measured in feet.

The big picture: The joining of weather systems embedded in both the polar, or northern branch, of the jet stream and the southern branch is projected to create a bomb cyclone. Such storms undergo a process known as bombogenesis, with their minimum central air pressure readings plunging at least 24 millibars in 24 hours.

Schumer vows to confirm Breyer replacement "with all deliberate speed"

Chuck Schumer. Photo: Alex Wong/Getty Images

Senate Majority Leader Chuck Schumer responded Wednesday to reports that Supreme Court Justice Stephen Breyer will retire, commending his time on the bench and promising to confirm President Biden's nominated replacement "with all deliberate speed."

Why it matters: The opportunity to appoint a new Supreme Court justice will be one of the longest-lasting pieces of Biden's legacy and could energize Democrats ahead of the midterms.