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


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

Brendan McDermid | Reuters

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The Federal Reserve’s most aggressive pace of tightening for the reason that Nineteen Eighties is making nearly all of Wall Street investors imagine stocks might be underwater for longer, based on the brand new CNBC Delivering Alpha investor survey.

We polled about 400 chief investment officers, equity strategists, portfolio managers and CNBC contributors who manage money, asking where they stood on the markets for the remainder of 2022 and beyond. The survey was conducted this week.

Fifty-eight percent of respondents said their biggest concern for the markets straight away is the Fed being too aggressive. The central bank last week raised rates by three-quarters of a percentage points for a 3rd straight time and pledged more hikes to beat inflation, triggering an enormous sell-off in risk assets.

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“While this aggressive pace of mountaineering should bring inflation closer to the two% goal, it should also likely bring economic hardship,” said Principal Global Investors Chief Global Strategist Seema Shah. “The Fed’s tolerance for economic pain doesn’t bode well for risk assets. … Get defensive, times are getting tougher.”

Greater than 60% of the investors imagine the S&P 500 will end the yr below 4,000, which might translate right into a 16% loss for the yr. Still, the 4,000 level about 8% higher than where the benchmark traded Tuesday.

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

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

While investors expect more wild moves within the markets, they still think the U.S. stays the most effective place for his or her money, the survey showed.

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