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Longtime market bull Phil Orlando is bracing for a rough stretch because Wall Street has reached a critical “inflection point.”

The Federated Hermes chief equity market strategist is blaming the risk dynamic. Not only does Orlando see hotter-than-expected inflation and the Covid-19 delta variant as glaring issues, he’s also worried about uncertainty surrounding monetary and fiscal policy.

“We’re entering what is historically a seasonally choppy period of time, and we’ve got a bunch of things that are coming together at the same time,” he told CNBC’s “Trading Nation” on Monday. “We’ve got this surging inflation. We’ve got questions about what the Federal Reserve is going to do in terms of policy. We’ve got this debt ceiling issue that’s coming up the end of this week.”

It appears Wall Street isn’t sharing his concern. On Monday, the S&P 500, Nasdaq and Dow closed at all-time highs. The record activity comes a day before the Federal Reserve gets ready to convene for its policy meeting.

Orlando, who oversees $625 billion in assets under management, suggests investors will soon get a wake-up call.

“The stock market has done incredibly well. It’s quite literally doubled since the bottom of the pandemic low — March a year ago,” noted Orlando, who warns valuations are frothy.

The S&P 500 is up 18% so far this year. According to Orlando, the index is noticeably vulnerable to a 5% to 8% pullback over the next two months. His S&P 500 year-end target is 4,500. The index closed at 4,422.30 on Monday.

“We’re less than 100 points away from our full-year objective,” he said. “Our view is that there could be some volatility or some chop as the market sort of consolidates around all of these concerns and issues.”

Since Orlando calls underlying economic and market fundamentals quite strong, he would use weakness as a buying opportunity. His favorite market group is domestic large-cap value, with an emphasis on financials, energy and consumer discretionary stocks.

“It was those cyclical stocks that we left for dead back in the spring of 2020,” Orlando said. “It [the recession] ended in April of last year, and now the market has got to play catch-up to price in these very powerful revenue and earnings gains that we’re seeing.”

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