US equities are expected to continue their upward trend for the rest of the year, boosted by the Federal Reserve’s sharp interest-rate cut, which has raised hopes for a soft economic landing, according to a survey of Bloomberg Terminal subscribers.
While the S&P 500 is forecasted to climb, 44% of respondents predict the index will rise less than 6% from its current level, with some expecting it to reach new heights next year. A modest majority of 75% of participants in the Markets Live Pulse survey believe the economy will avoid a technical recession through 2025.
Stocks and bonds initially fell following the Fed’s rate reduction, the first since 2020, with the S&P 500 reversing an earlier 1% gain. Fed Chair Jerome Powell tempered expectations for further large rate cuts, signaling that borrowing costs may need to remain higher than pre-pandemic levels to sustain economic growth.
Investor sentiment reflected caution, with 57% expecting value stocks to outperform, while 43% still see potential in the ongoing AI boom. Additionally, 49% of respondents favored increasing equity holdings, while 31% suggested bonds as a safer bet amidst lingering uncertainty.
Looking ahead, the US elections in November and geopolitical tensions in the Middle East are seen as potential headwinds. 58% of survey participants believe a Donald Trump victory could result in higher Fed rates by the end of 2025, while 42% foresee a similar scenario under Kamala Harris if she wins the presidency. Both candidates have proposed increased spending, though neither has directly addressed the ballooning government debt.
As the Fed’s rate cut clears the way for more focus on these challenges, investors will continue to weigh risks as the year progresses.
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