Investors believe aggressive Fed will keep stock market down for the rest of 2022, CNBC survey shows

Traders work on the ground of the New York Stock Exchange (NYSE) in New York, September 26, 2022.

Brendan McDermid | Reuters

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The Federal Reserve’s most aggressive tempo of tightening since the Nineteen Eighties is making the majority of Wall Street buyers believe shares will be underwater for longer, in line with the new CNBC Delivering Alpha investor survey.

We polled about 400 chief funding officers, fairness strategists, portfolio managers and CNBC contributors who handle money, asking the place they stood on the markets for the rest of 2022 and past. The survey was carried out this week.

Fifty-eight p.c of respondents mentioned their largest concern for the markets proper now’s the Fed being too aggressive. The central financial institution final week raised charges by three-quarters of a proportion level for a 3rd straight time and pledged extra hikes to beat inflation, triggering an enormous sell-off in danger property.

“While this aggressive pace of hiking should bring inflation closer to the 2% target, it will also likely bring economic hardship,” mentioned Seema Shah, chief world strategist at Principal Global Investors. “The Fed’s tolerance for economic pain doesn’t bode well for risk assets. … Get defensive, times are getting tougher.”

More than 60% of the buyers believe the S&P 500 will finish the year under 4,000, which might translate right into a 16% loss for the year. Still, the 4,000 stage is about 8% greater than the place the benchmark traded Tuesday.

Rising charges and volatility in forex markets brought on the S&P 500 to drop 1% on Monday, taking out its June low. The Dow Jones Industrial Average slipped right into a bear market, down about 20% from its Jan. 4 closing excessive.

“The market reaction to early earnings releases suggests that slowing economic activity is nowhere near priced in,” mentioned Lauren Goodwin, economist and portfolio strategist at New York Life Investments. “Earning estimates are likely to continue their decline until we see a bottoming in leading economic indicators. We are not there yet, suggesting volatility ahead for risk assets.”

While buyers anticipate extra wild strikes in the markets, they nonetheless assume the U.S. stays the finest place for their money, the survey confirmed.

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