Equities are 'Weeks Away' From a 10% to 15% Correction, Says Prominent Market Bull

BTIG's chief equity and derivatives strategist Julian Emanuel believes some indicators are pointing towards a market correction as investors continue to look towards the Fed and their eventual shift in the bond-buying policy.

A combination of the S&P 500, Nasdaq and the CBOE Volatility Index VIX rising together could translate into a market correctio, Emanuel notes.

“Whenever we’ve seen that going back to the beginning of 2018, we were essentially weeks away from a correction. The most recent one being last September. We think history could in fact repeat itself,” he told CNBC.

“You could trade back to 4,000 [on the S&P 500],” he added. The S&P500 closed at 4,387.16 on Monday.

“Four or five weeks ago, we really weren’t terribly concerned about the delta variant. It’s entirely possible that the [economic] growth we expected might come a little bit slower,” he further added.

The strategist, who is regarded as one of the bigger Wall Street bulls, believes a short-term correction could help refresh the market while the long-term bull thesis remains solid.

“At these valuations and as much as these stocks have run, they are in fact vulnerable in our view, particularly given the potential for China, as a wildcard going forward,” added Emanuel.

China, on the other hand, is an “interesting play” but “not for the faint of heart.” He notes that Chinese stocks are trading at the cheapest level compared to the U.S. in 25 years.

“The options market in particular is sending the kind of near panic message that we saw at the bottom of the pandemic trough. There is definitely an opportunity there that may in fact come at the expense of these Nasdaq stocks that have been such high flyers in recent months,” Emmanuel concluded.

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