BTIG says stocks will plunge 15% to 20% from current levels as US protests add to the market's 'menu of uncertainties'

• Julian Emanuel, BTIG's chief strategist, told investors to prepare for a 15% to 20% pullback in stocks, saying that widespread protests in the US have added to "menu of uncertainties" in the market.
• Emanuel said on CNBC on Monday that small-cap indexes were particularly sensitive to a correction and that it was "time for the market to reassess the uncertainties to the economy."
• "The environment is more volatile now, so what we are saying is envision yourself as an investor with a portfolio down 15% to 20%," Emanuel said.
• Widespread protests have broken out in the US in the past week after George Floyd's death in police custody. A white officer knelt on Floyd's neck for more than eight minutes, killing him.

The Wall Street brokerage BTIG is telling investors to brace for a slump of 15% to 20% in stocks, adding that mass protests in the US in recent days have added to the "menu of uncertainties" facing markets in 2020.

Julian Emanuel, the managing director and chief equity and derivatives strategist at BTIG, said in a CNBC interview on Monday, "We're not even sure we had a recovery."

He added that BTIG thinks "it's probably time for the market to reassess the uncertainties to the economy."

"The environment is more volatile now, so what we are saying is envision yourself as an investor with a portfolio down 15% to 20%."

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He added: "When you look at the rally of the lows in March off the small-cap indexes, we think it is the time for the market to reassess the uncertainty to the economy, and the social unrest in the last two days adds to that menu of uncertainties."

The small-cap Russell 2000 Index has risen 43% since March's market crash. Over that same period, the S&P 500 is up more than 30% and is just over 10% below its all-time high from February.

Big gains in small-cap stocks have given rise to hopes that a broader recovery in equity markets may persist.

Despite huge gains in the past two months, markets face a cocktail of risks — from the economic downturn brought about by the coronavirus pandemic to escalating US-China trade tensions and now widespread protests in the US.

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Protests erupted last week after George Floyd's death in police custody in Minneapolis. A white police officer knelt on Floyd's neck for more than eight minutes, killing him. Floyd, who was black, was 46.

While most protests have been peaceful, some have erupted into civil unrest, involving destruction of property and looting, as well as violence when police officers clash with protesters. President Donald Trump has threatened to deploy troops in cities to quash protests.

Experts think while US-China tensions have dominated markets in recent days, the protests could undermine consumer confidence and even spark a second wave of coronavirus cases, which may ultimately feed into stocks.

While 2020 in the markets looks bleak, Emanuel struck a much more optimistic tone for 2021.

"Our view is that you get into the fall and you get into early next year, likely there's enough time for the economy to find its footing, for there to be medical advances, and we can envision new all-time highs at some point in 2021, unquestionable," Emanuel said.

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