Stock markets are ignoring a 'laundry list' of risks, strategist says

cnbc.com:

Stock markets are ignoring a «laundry list» of potential risks in their recent bull run, and a big downturn could be incoming, according to Julian Howard, investment director for multi-asset solutions at GAM Investments.

Despite the risks associated with a steep rise in interest rates over the past 15 months, tech stocks particularly led the charge so far this year, as investors rushed to gain exposure to the AI boom.

The Nasdaq 100 closed the Friday session up 33% on the year, while the S&P 500 is up more than 11% and the pan-European Stoxx 600 has added just under 9%.

Yet in light of the latest round of economic data, economists are beginning to increase the probability of further interest rate hikes from the U.S. Federal Reserve, with the U.S. economy and jobs market still resilient, while core inflation is proving stickier than expected.

Howard told CNBC's «Squawk Box Europe» on Monday that, in light of this risk, the Nasdaq was «very expensive» at the moment, and that now is the time for investors to «wait it out rather than engaging heavily in this market.»

«There's this laundry list of problems, and interest rates and inflation haven't gone away. The debt ceiling is done, and I think there's a sense that, actually, the markets need to refocus again on inflation and rates,» Howard said.

«The U.S. consumer is pretty ambivalent about inflation, it kind of expects higher inflation now, and that's dangerous because that entrenches higher inflation itself, because obviously expectations lead to higher inflation.»

Further increases in borrowing costs would also raise the discount rates — a metric used by Wall Street to value stocks by figuring out the value of future earnings. This would not bode well for the tech stocks