It's not just the trade war – these global fears could put stocks through the wringer

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It's not just trade – these global fears could put stocks through the wringer

The U.S.-China trade war is spooking Wall Street.

The S&P 500 plummeted more than 3% last week, its worst week of the year, after President Donald Trump threatened additional tariffs on Chinese goods.

Phil Orlando, chief equity market strategist at Federated Investors, calls the latest escalation a "two-fer" for the White House.

"Trump is using the latest new round of tariffs on China for two reasons – first, to extract trade concessions from China on the structural issues (currency manipulation, intellectual property theft and forced technology transfers for U.S. companies in joint ventures with Chinese companies); second, to compel [Fed Chair Jerome] Powell and the Fed to be more aggressive come the September FOMC meeting," Orlando told CNBC's "Futures Now" in an email Friday.

Earlier this week, Powell cited the ongoing trade war as one of the reasons for easing monetary policy. At the July Federal Open Market Committee meeting, members agreed to cut interest rates to offset trade headwinds and international weakness.

But, investors face more hurdles than just the trade war, Orlando said during an interview on Thursday, and it could cause market waves through to the fall.

"As you get into the August, September, October time frame, you've got the Fed backdrop, and then you've got all of the overseas issues which in our view are legitimate concerns," said Orlando.

Aside from the escalating trade conflict with China, Orlando cites Middle Eastern tensions, the European Central Bank's leadership transition from Mario Draghi to Christine Lagarde, the Brexit October 31 deadline, and Japan's value-added tax (VAT) as potential downside catalysts in coming months.

"Those issues, I think we're going to get through them, but that could represent some increased choppy volatility over the course of the next couple of months before we turn up and get back to record highs at the end of the year," said Orlando. "We fully expect the S&P to be at 3100 by year-end, but there could be some chop in between."

Orlando sees the potential for these market-moving events to take the S&P 500 down to 2780 to 2800 before it bottoms out. That implies 5% downside from current levels. A move to his 3100 year-end target would require a 6% rally.

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