U.S. stocks will continue to climb for the rest of the year as the Federal Reserve’s aggressive rate cuts increase the odds of a soft landing for the economy, a Bloomberg Terminal user survey shows.
In the latest Markets Live Pulse survey, 44% of 173 respondents predicted the S&P 500 would rise less than 6% from Wednesday's close, while 19% expected it to fall. The remaining 37% expected a gain of more than 6%.
The vast majority expect a soft landing, with 75% predicting the economy will avoid a technical recession by the end of next year. A 6% gain would be roughly in line with the S&P 500's pace of gains so far this year.
U.S. stocks and bonds fell on Wednesday after the Federal Reserve cut interest rates for the first time since 2020. The S&P 500 fell, reversing an intraday gain of as much as 1%, after Fed Chairman Jerome Powell warned against assuming that aggressive rate cuts would continue and said borrowing costs may need to remain above pre-pandemic levels for a long time. U.S. Treasuries sold off as Powell expressed confidence that there would be no recession.
Cautious expectations for future stock gains highlight the uncertainty that remains about the Federal Reserve's interest rate path and the U.S. economy.
As investors doubt whether the AI boom can sustainably drive profit growth, U.S. stocks have fallen since their peak in July, plummeted in early August, and plunged again at the beginning of this month before recovering. The survey showed that 57% of people expect value stocks to outperform, and 43% believe that AI stocks will rise again.
Respondents tended to agree with Powell's assessment of a healthy economy, with 49% saying the best course of action right now was to increase holdings of stocks. 31% preferred buying bonds, while the remaining 20% said it would be best to increase holdings of cash or gold.
The Fed’s first rate cut also cleared the way for investors to focus on other potential headwinds for riskier assets, including simmering tensions in the Middle East and the U.S. election scheduled for Nov. 5. Respondents believe the outcome of the vote could have a significant impact on monetary policy.
About 58% expect the Fed to raise interest rates by the end of 2025 if Trump returns to the White House, while the remaining 42% say the Fed's benchmark rate will be higher if Vice President Harris wins. Both candidates have proposed plans to increase spending, but neither has responded to concerns that the federal government could be on an unsustainable path as the government debt swells.
The MLIV Pulse survey is a survey of clients conducted after the Federal Reserve’s decision is announced.
Article forwarded from: Jinshi Data
