Investors believe the stock market is set for losses, and cash is the best safe haven, CNBC survey shows

Traders work on the floor of the New York Stock Exchange (NYSE) on March 28, 2023 in New York City.

Brendan McDermid | reuters

Wall Street investors believe cash is the best safe haven right now as the stock market continues to slide into losses after a positive first quarter, according to a new CNBC Delivering Alpha investor survey.

We polled nearly 400 chief investment officers, equity strategists, portfolio managers and CNBC contributors who manage money about where they stand in the markets for the second quarter and beyond. This survey was done during the last one week.

Nearly 70% of respondents said the S&P 500 could see further declines. Thirty-five percent of investors believe the biggest risk to markets this year is missteps by the Federal Reserve, while another 32 percent said persistent inflation is the most pressing threat.

Markets have been particularly resilient so far, despite the banking crisis and continued Fed tightening. The S&P 500 is on track to post a more than 5% gain in the quarter, following a big return in equities with the government’s emergency rescue measures helping stave off chaos in the banking industry.

“The economic concerns surrounding recessionary fears have not disappeared as the yield curve still represents a counter to the market’s climb,” said Quincy Crosby, chief global strategist at LPL Financial. “But if the market can continue to move higher despite the wall of concern that seems to climb higher with each new headline, then the question becomes who is right, and which side is more prescient.”

The Fed raised interest rates by a quarter percentage point last week, while hinting at another rate hike this year. Many investors believe that the central bank should change course immediately because more rate hikes will worsen banking problems and lead to a severe economic recession. However, Fed Chairman Jerome Powell clearly stated that rate cut is not his base case.

DoubleLine Capital CEO Jeffrey Gundlach recently said the bond market is screaming that a recession is imminent, and he sees the Fed starting to lower interest rates “substantially” in the near future. Mike Wilson, Morgan Stanley’s chief investment officer, said this week that investors are still too optimistic about corporate earnings, and a severe downturn is going to drag stocks down.

With an overall bearish outlook on the market, 60% of investors said cash is their safe haven right now. The recent banking turmoil has prompted significant inflows into money market funds, whose assets have swelled to a record $5.2 trillion as of Wednesday, according to the Investment Company Institute.

“Money market yields >4% are hard to resist ahead of a recession, and the ‘option value’ of cash keeps rising,” Jared Woodard, investment and ETF strategist at Bank of America, said in a note.

Christian Muller-Glissmann, head of asset allocation research at Goldman Sachs, also set a preference for cash over equities around the world as he said banking stress reversed a sharp risk appetite.

Source: www.cnbc.com