Stocks at risk of significant pullback

The S&P 500 fell 1.9 percent last week.

Markets were weighed down by concerns over possible monetary policy tightening after the Federal Reserve signalled after its monetary policy meeting on Wednesday that it is likely to raise interest rates in 2022.

Moody’s Analytics chief economist Mark Zandi told CNBC on Friday that the market could see a 10 to 20 percent pullback.

“The headwinds are building for the equity market,” said Zandi. “The Federal Reserve has got to switch gears here because the economy is so strong.”

And yet, the market could also face the opposite risk: a renewed economic downturn due to a resurgence of COVID-19.

The US Centers for Disease Control and Prevention announced last week that the Delta variant of the coronavirus, also known as B.1.617.2, is a variant of concern.

The Delta variant had been declared by the World Health Organization as a variant of concern last month, and the UK had delayed further reopening of its economy after a surge in the strain.

“This is the most troubling variant by far, because it's another 60% more contagious than the Alpha, so it's a super spreader strain,” said Dr Eric Topol, the founder and director of the Scripps Research Translational Institute.

“It doubles every seven to 10 days, which means when it gets to three weeks from now, this variant will be dominant,” said Topol.

Noting that the Delta strain had already become dominant in the UK, National Institute of Allergy and Infectious Diseases Director Dr Anthony Fauci said: “We cannot let that happen in the United States.”