“You could see a big rotation away from the reopening stocks,” said Bianco, who sees gaming, hotel, airline and cruise line stocks among the most vulnerable groups.
On the other hand, he believes the risk could boost technology and stay-at-home trades. If the delta variant continues to spread, Bianco sees a high probability of more stimulus money.
“You can take a playbook out of last year and say ‘If we get rising variant and we get restrictions, more stimulus money is coming.’ And, what have we learned about stimulus money? It goes right into the brokerage account. It goes right into the stock market,” said Bianco. “The flows in ETFs’ record was late March when we got the $1200 checks.”
Despite the challenging backdrop, Bianco expects the broader market to hold up until the end of the year.
He expects all that to change by year-end. Bianco has been bracing for a troublesome inflation comeback since last year. He told CNBC’s “Trading Nation” in October an inflation surge may force the Fed to abandon its easy money policy much sooner than intended.
And, he’s reminding investors the stock market is not cheap.
“It’s near record high valuations,” Bianco said. “It needs to continue to give this blowout earnings like we saw with some of the tech companies in the last day or two.”