Ron Insana warns that the stock market, already on the ropes after enjoying a lengthy bull run since Donald Trump was elected president, could tumble another 10 percent if certain land mines are hit.
“It's hard to get bearish on a market that has shown such resilience in the face of these emerging concerns. But I am less bullish on the overall market than I have been in quite a number of months,” he wrote for CNBC.com
"It may be time for traders to take some chips off the table, go long on volatility and get more aggressive about picking stocks whose prospects put them in a market beating position," he explained.
Insana said there “are signs of weakness setting in. Already stocks have pulled back around 2 percent from their all-time highs scored earlier this year,” he said, adding that it might only get worse.
"The second quarter is going to be filled with economic, political and foreign policy land mines. As with any disciplined approach to investing, average investors should keep contributing to a retirement savings plan on a monthly basis, as has been past practice and continue to buy individual stocks that have strong profit prospects irrespective of the shifting environment," he said.
Insana also warned of other dangers as well.
"But, there could be an event that shakes the market from its recent complacency and gives traders a new opportunity to buy low and sell high – think another political miscue in D.C., an unexpected win by presidential candidate Marine Le Pen in France or a provocative act from North Korea that could drive stocks down 5-10 percent from current levels," he said.
“The Trump administration's ham-handed approach to moving its agenda through Congress shows no signs of letting up,” he said.
The failure of the president and a GOP-led Congress to "repeal and replace" the Affordable Care Act, was not just a legislative failure, it also fractured a Republican coalition needed to push through all other agenda items, from tax reform to future budget agreements, Insana said.
“And it's not just Trump's political fumbles that could foil the market's momentum. Economic indicators like recently released weak car sales data could stay the Fed's hand from normalizing interest rate policy. That signal, if sent, would tell the market the economy is slowing, not growing.”
Insana isn't alone in his pessimism.
A recent survey found that U.S. economic growth is expected to accelerate this year and next, yet remain modest, even if Trump's promised tax cuts and infrastructure spending are implemented, the Associated Press reported.
The economy will grow a solid 2.3 percent this year and 2.5 percent in 2018, according to 50 economists surveyed by the National Association for Business Economics. Those rates would be up from 2016's anemic pace of 1.6 percent.
Still, those rates are below the 3 percent to 4 percent growth that Trump has promised to bring about through steep corporate and individual tax cuts and more spending on roads, airports and tunnels. Most of the economists surveyed assume that a tax reform package will be approved by Congress this year. About two-fifths expect an infrastructure spending proposal to pass this year, while rest forecast it will happen in 2018 or beyond.
The survey also found that 70 percent of economists think financial markets are too optimistic about the impact of Trump's proposals, should they be enacted. The S&P 500 stock index has risen about 6.5 percent since the presidential election on anticipation of faster growth stemming from Trump's policies. Shares slipped last week as Congress and the Trump administration failed to agree on a health care proposal to replace the Obama administration's Affordable Care Act.
The economists surveyed work for companies, trade associations and in academia. The results were compiled by Timothy Gill, an economist at the American Iron and Steel Institute; Steve Cochrane, an economist at Moody's Analytics; and David Teolis at General Motors, among others.
(Newsmax wire services contributed to this report).