The Fed is the biggest risk to the stock market right now

Business Insider executive editor Sara Silverstein speaks with Brian Levitt, the senior investment strategist at OppenheimerFunds, who highlights uncertainty around the Federal Reserve as the biggest risk to markets right now. He says the yield curve is currently steep, which is reasonable for supporting credit growth and the economy. He does note that if the Fed attempts to get too tight, we could see long rates come down. In terms of market price swings, he says that they normal accelerate when you have policy volatility. Levitt says that if there is a stock correction around the naming of a new Fed chair, he views that as a buying opportunity.

Following is a transcript of the video. This transcript has been lightly edited for length and clarity.

Brian Levitt: Yeah, the biggest risk to markets right now is that we simply don't know what the composition of the Federal Reserve is going to be.

If the Federal Reserve attempts to get too tight, you could see long rates come down. It could be a game of chicken. You could see long rates start to come back down, which could forestall this economic expansion. Now, if Janet Yellen is the Fed chair - that is highly unlikely - she has been very dovish throughout her tenure. If John Taylor is the Fed chair, that's a different story. The markets might have to reconsider where we're going with policy.We don't know who's going to be chairing the Federal Reserve. In the last month or so, 10-year Treasury rates have gone up. You're at 2.40 on the 10-year and you're at 1.25 on the fed funds rate, that's a reasonably steep yield curve to support credit growth and to support the economy.

With regard to market corrections, volatility typically picks up when you have policy volatility. Why has there been no volatility for so long? There's been no policy volatility. When was the last time we had a big market correction? It was 2015 into 2016, when the Fed raised rates and the bond market didn't like it. We could see that game of chicken in the beginning part of 2018. I suspect the Fed will back off. If there is a market correction around that, in my opinion, it would ultimately represent a buying opportunity.