Federated Hermes' Phil Orlando's bull case for stocks may be on shaky ground.
The firm's chief equity market strategist reveals there are two market risks keeping him up at night.
His first concern surrounds the presidential election and whether Democrats will get control of both the White House and Congress.
"What might fiscal policy regime change look like, if at all, come next year?" Orlando told CNBC's "Trading Nation" on Friday.
In a blue wave situation, Orlando believes Joe Biden's tax policies would likely get passed and put pressure on corporations and individual Americans.
He's also worried about the trajectory of coronavirus infections and deaths.
"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."
His base case calls for a "substantial amount" of volatility leading up to the election. Orlando is telling clients to buckle their seat belts because he sees the potential for another 10% correction.
"Certainly, President [Donald] Trump's Covid diagnosis… has amplified that," he said.
Orlando's year-end S&P 500 price target is 3,500, a 4% gain from current levels. But it's more than 2% away from the index's all-time high.
If the U.S. can contain the pandemic and Republicans hold at least a slight majority in the Senate, Orlando expects the S&P 500 will hit record highs next year. His 2021 year-end forecast is 3,800.
He lists easy earnings comparisons in the winter quarter, an improving economy and an extremely accommodative Federal Reserve policy as key reasons why he's not ready to abandon his bullish stance.
"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."
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