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Traders work on the floor of the New York Stock Exchange (NYSE) on December 08, 2021 in New York City.Spencer Platt | Getty Images

Has the risk of a full-blown bear market risen on Wall Street?

A standard-issue correction has already arrived for the Nasdaq Composite. However, the larger question is whether tighter central bank policies in the Western world will lead to deeper declines than we have already seen in major averages and among individual stocks.

Many years ago, legendary investor Stanley Druckenmiller told me that his historical analysis suggested that there are two triggers for meaningful bear markets in stocks: rising interest rates and the onset of war.

Now, we seem to be staring down the barrel of both as the Federal Reserve has now acknowledged that it plans rate hikes throughout this year and a reduction in its holdings of Treasury bonds. Meanwhile, saber-rattling is taking place from the Kremlin to Kyiv and from Tiananmen to Taiwan.

The Fed's balance sheet reduction, known as "quantitative tightening," would be a powerful addition to rate hikes in reducing surplus liquidity in markets. If history is any guide, it would also further weaken equity markets over the course of the tightening cycle.

Just the threat of these events, prior to the Fed's admissions, knocked markets for a loop, wringing out speculative excesses in cryptocurrencies, meme stocks and SPACs, or special purpose acquisition companies.

AMC Entertainment and GameStop shares are each down about 80% from their memetic highs. Shares of Robinhood and Coinbase have been robbed.

Weak assets fall first before being followed by the market's less risky bets.

The NYSE Advance/Decline Line is rolling over while the number of new 52-week lows has exploded.

True, some sentiment indicators like the VIX (or fear indicator) recently reached extremes suggesting an oversold rally would ensue. Yet, I don't believe this tumult is nearly over in the intermediate to longer-term.

A time of heightened risk around the worldVIDEO1:1501:15Financial market volatility is not enough for the Fed to back down, says Schwab's SondersClosing Bell

Geopolitical risks are rising rapidly. The U.S. has put troops on alert, and NATO has placed forces on standby and reinforced positions in Eastern Europe as the threat of a Russian invasion of Ukraine continues to rise. NATO allies are also reportedly sending weapons to Ukraine to shore up its defenses.

Russia was pessimistic on Washington's response to its demands that Ukraine never enter NATO.

Earlier this week, the U.S. State Department told family members of diplomats and embassy staff to leave Ukraine, a sign of growing concern that Russian president Vladimir Putin is not bluffing. This is a belief buttressed by the 100,000 Russian troops, weaponry and logistical support amassed on Ukraine's border and reports that Putin is attempting to install a pro-Russian president in Kyiv.

Also, it's interesting to note that Russian stocks, which performed well last year in lockstep with oil prices, have tumbled in 2022.

Against a backdrop of rising oil prices and a flight to quality into U.S. Treasury bonds, the combined messages from those markets appear menacing.

Add to those concerns renewed Chinese flyovers in Taiwan which prompted the Taiwanese Air Force to scramble and chase 39 fighter planes away over the past weekend.

If there is even an economic war between the West and Russia resulting in stiff sanctions, like cutting off Russian energy exports, blocking Russia from using SWIFT – a mechanism for international financial transfers – or placing export controls on goods heading to Russia, the global economic stakes rise dramatically.

The stakes are even higher if Putin and China's President Xi Jinping are coordinating their efforts to destabilize Western alliances and fracture already-frayed relations.

Such a set of developments could freeze central banks in place and result in a friendlier Fed.

That would be relatively better for risk assets, but far from a friendly overall environment, especially given a three-year bull run, lofty valuations and speculative excesses in some corners of global markets.

The pandemic-induced bear market in 2020 lasted 21 trading days as the S&P 500 tumbled 34% in the most compressed bear phase on record.

I'm considerably less optimistic that the next bear market, if this is indeed the start of one, will be over so quickly, or do so little damage.

Cash may no longer be trash in 2022.

—Ron Insana is a CNBC contributor and a senior advisor at Schroders.

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Tags: the fed’s the fed’s russian president treasury bonds the threat that russian bear market

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The stock market is practically begging to be punished

New York (CNN Business)The old joke goes like this: Two friends are at a resort and one says, "The food here is really terrible." The other replies, "And the portions are so small!" Today, it's investors who dislike the taste of the Federal Reserve's interest rate hikes but seemingly want more anyway.

Markets have plummeted over the past month as Federal Reserve telegraphed that it would regularly hike interest rates by half a percentage point for the foreseeable future to combat persistent inflation growth. The sell-off put the S&P 500 on the precipice of bear market territory: At one point last week, the market was down nearly 20% from its all-time high. Now, investors are asking for more. They're calling for a three-quarter-point rate hike at the conclusion of the Fed's June meeting, despite Fed Chair Jerome Powell's assurances that an increase that high wasn't on the table.
    Bank of America analysts wrote in a note that they fear there will soon be a wage-price spiral in the US ​​because of risks that "the Fed hikes too little." The current market reaction, they said, suggests that "investors see the Fed as moving too slowly on the inflation fight: a 75 [basis point] hike might have been feared but it appears it would have been preferred."
      Nomura Securities has predicted that the Fed will hike the fed funds rate by three-quarters of a point in June and July after their half-point rise in May. Read MoreFed Chair Jerome Powell: We wont hesitate to raise rates to tame inflation"We recognize Fedspeak has not outright endorsed a 75 basis point hike yet, but in this high inflation regime we believe the nature of Fed forward guidance has changed — it has become more data dependent and nimble," said Rob Subbaraman, Nomura head of global markets research, in a note.The Fed could hike rates to 5% by the time it ends the current bout of tightening, ​​Deutsche Bank's chief economist said. That would be the highest level since 2006.
        Fed-funds futures traders see a 9% likelihood that the Federal Reserve will raise its main policy rate target by three-quarters of a point in June, to between 1.5% and 1.75%, according to the CME FedWatch Tool. St. Louis Fed president James Bullard has stoked the flames for a potential three-quarter-point hike this year in public speeches and Federal Reserve Bank of Cleveland President Loretta Mester told Japan's The Nikkei that a 0.75 percentage point hike could not be ruled out later this year in an interview Monday. So why are markets fighting the Fed head's assurances that a larger hike won't come in June — and hurting themselves by predicting it will? "When a Fed official suggests a 50 basis points hike, markets immediately start trying to price in 75 basis point hikes," said Jamie Cox, Managing Partner for Harris Financial Group. "It's madness really."The Dow has fallen 3,930 points, or 11% in 2022. The S&P 500 has dropped nearly 14% and the Nasdaq Composite has lost more than 25%. "Powell tried to take the 75 basis point hike off of the table at the last press conference," said David Lebovitz, a global market strategist at J.P. Morgan Asset Management.But the following week, the Consumer Price Index, a key measure of inflation, shot up 8.3% for the year. The measure was lower than March's 8.5% increase, but higher than the 8.1% increase economists expected.The Fed has a new plan to avoid recession: Party like its 1994The issues the markets have with the Fed may have less to do with an eye toward self-flagellation and more to do with a growing mistrust of the institution. The old-time mantra of "don't fight the Fed" has morphed into "don't believe the Fed." "People start to lose faith in the idea that the Fed really does have its arms around inflation," said Lebovitz. "It's all about getting a grip on what the Fed is going to do and unfortunately, given the lack of clear guidance from them, and an inflation report that surprised to the upside, investors are a little bit uncomfortable."
          Even former Fed Chair Ben Bernanke seeded some doubt this week when he broke the unspoken edict amongst former Fed chairs to not speak ill of their successors. The Fed made a mistake in delaying their decision to raise rates, he said during an interview on CNBC's Squawk Box Monday. "And I think they agree it was a mistake."

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