There are storm clouds on the horizon for the stock market - literally

• The return of El Niño later this year could spark downside volatility in the stock market, according to Charles Schwab.
• The firm said extreme weather could exacerbate supply chain disruptions and lead to persistent inflation and a falling stock market.
• The last El Niño event in 2015 coincided with a global stock market sell-off that extended into 2016.

Extreme weather events could sabotage the economy and stock market later this year as the world prepares for a possible El Niño event, according to Charles Schwab chief global investment strategist Jeffrey Kleintop.

The arrival of El Niño later this year has surged to a 90% probability, according to The World Meteorological Organization, which could lead to shifts in temperatures and global weather patterns. Already, it seems to be having an impact.

Heat waves across the globe have led to low water levels in certain rivers that facilitate the transport of goods via barges, which in some cases could not traverse the drained rivers. In France, th Rhone river has been too hot to cool down the nuclear reactors for Electricite de France, which has led to shutdowns and lower power output.

These extreme weather events can have a material impact on the economy and lead to persistent inflation, higher interest rates, and ultimately a lower stock market, according to Kleintop.

"If these impacts continue to threaten agriculture, energy, and lives, or worsen — as forecasters expect — the economic impact could be significant for both inflation and economic activity," Kleintop said in a Monday note.

Higher energy prices could be exacerbated by low water levers in reservoirs due to extreme heat, which would curtail hydropower generation and put an additional strain on power supplies, putting upward price pressure on energy alternatives like coal and natural gas.

And if water levels in key rivers are too low to facilitate the transfer of goods, that could lead to heightened freight transportation costs as trucking and rails are forced to pick up the slack.

All of this potential inflation in energy and food costs, caused by extreme weather events, could force central banks to keep interest rates higher for longer to combat inflation.

"High food prices could filter through to wages if they persist, which could sustain core inflation at higher levels, and result in data-driven central banks to keep monetary policy tight," Kleintop said.

There are more obvious risks to the economy sparked by extreme weather events, like hurricanes and the losses experienced by the people in the path of the storms and the insurance companies that have exposure to the area. Such exposure has recently forced big insurance companies to completely exit certain markets in Florida and California.

All of these factors sparked by El Niño and the extreme weather could ultimately lead to a lower stock market, as has happened in the past.

"Market volatility could increase if El Niño impacts accumulate. The last El Niño coincided with the market selling off 13% in 2015 to 2016, although other factors likely contributed to the volatility," Kleintop said.