Stocks Will Defy Risks to Deliver Year-End Gains, Survey Shows

A recent Markets Pulse survey of 116 respondents indicates that stocks are expected to deliver year-end gains, with two-thirds anticipating the S&P 500 will continue rallying into 2025 despite inflation and jobs outlook concerns. A majority of respondents believe these gains will be primarily driven by Federal Reserve signals for further interest-rate cuts before year-end.

Analysis

A recent Markets Pulse survey conducted from September 5-10 indicates prevailing bullish sentiment among market participants for the remainder of the year. The survey of 116 respondents found that two-thirds expect the S&P 500 rally to extend into 2025. This optimism is primarily anchored in expectations of accommodative monetary policy, with a majority of bullish respondents anticipating signals of further interest-rate cuts from the Federal Reserve before year-end. Notably, this positive outlook persists in defiance of acknowledged macroeconomic headwinds, including persistent inflation risks and a weaker jobs outlook, suggesting investor positioning is heavily weighted towards a dovish Fed pivot rather than current economic fundamentals.

Key Decisions for Investors

• Given the strong bullish sentiment identified in the survey, investors may consider maintaining exposure to broad market indices like the S&P 500 to capitalize on a potential Fed-driven, year-end rally.
• The market's bullish thesis is heavily dependent on Federal Reserve interest-rate cuts, so investors should closely monitor central bank communications and inflation data, as any hawkish surprise could trigger a significant market repricing.
• As investor optimism is currently outweighing concerns about a weaker jobs outlook, it may be prudent to assess portfolio hedges against the risk that negative economic data begins to materially impact corporate earnings and sentiment.