The Wall Street forecaster, who warned investors not to prepare for inflation once in a generation, has a new concern: Delta variant cases are creating new economic restraints.

According to Jim Bianco, the emerging risk will hamper the ability to select market winners and losers for the fall.

“That’s the hardest part [risk] for investors to find their way around, “the president of Bianco Research told CNBC’s” Trading Nation “on Wednesday.

In Bianco’s declining scenario, rising Covid-19 cases would hurt economic activity and profits.

“You could see a big rotation away from reopening stocks,” said Bianco, who ranks gaming, hotel, airline and cruise stocks among the most vulnerable groups.

On the flip side, he believes the risk could fuel tech and stay-at-home trades. If the delta variant spreads further, Bianco sees a high probability for more stimulus money.

“You can take out a playbook from last year and say, ‘If we get more variants and restrictions, there will be more stimulus money.’ And what did we learn about stimulus money? It goes straight to the broker’s account. It goes straight to the stock market, “said Bianco. “The flows on the ETF’s balance sheet were in late March when we received the checks for $ 1200.”

Despite the challenging environment, Bianco expects the broader market to exist by the end of the year.

“Over the next few months we can argue that inflation is temporary or not. We won’t find a solution to this. [The] The stock market will be fine, “he said.

He assumes that this will change by the end of the year. Bianco has been preparing for a problematic inflation comeback since last year. He told CNBC’s Trading Nation in October that a surge in inflation could force the Fed to abandon its easy money policy much sooner than intended.

And it reminds investors that the stock market isn’t cheap.

“It’s near record high ratings,” said Bianco. “There has to be those blowout gains like we’ve seen with some tech companies in the last day or two.”

At the close of trading on Wednesday, the S&P 500, tech-heavy Nasdaq and Dow are less than 1% off their all-time highs.

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