Bloomberg Market's real-time Pulse (MLIV Pulse) latest survey shows that with the continuous rate cuts by the Federal Reserve, most respondents predict that the performance of the US stock market for the rest of the year will surpass the government and corporate bond markets. Specifically, 60% of respondents are bullish on the performance of the US stock market in the fourth quarter, 59% of investors prefer emerging markets over developed markets, and avoid traditionalIts price has soared to a historic high, closely related to market expectations of interest rate cuts by the Federal Reserve.Such as US Treasury bonds, the US dollar, and gold.

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The survey results show that this risk appetite is in line with the bullish sentiment on Wall Street after the Fed cut interest rates this month. At the same time, the significant rise in the Chinese stock market after the government increased economic stimulus measures has further boosted market confidence. Yung-Yu Ma, Chief Investment Officer at BMO Wealth Management, pointed out that the main challenge facing the US economy is the high short-term interest rates. Therefore, they have started to lean towards risk assets and US stocks, considering adding positions on pullbacks.

The Federal Reserve lowered the benchmark interest rate on September 18 and is expected to continue cutting interest rates in the remaining two meetings this year. Most respondents (59%) expect a 25 basis points rate cut at each meeting, while 34% of respondents anticipate a larger rate cut, expecting a 75 or 100 basis points rate cut at each meeting. This forecast is close to the views of derivative traders, who generally believe that by the end of the year, the total rate cut by the Federal Reserve will be about 75 basis points. Investors are more confident in the Fed's ability to achieve an economic soft landing, boosting the possibility of a rise in the S&P 500 index in September, the first time since 2019.

Lindsay Rosner, Head of Investments in multiple departments at Goldman Sachs Asset Management, stated that the Federal Reserve and other central banks still have significant room for more rate cuts, providing a solid foundation for the U.S. economy and making valuations more reasonable. However, when asked about trades to avoid for the remainder of the year, 36% of respondents suggested steering clear of purchasing oil, while 29% opted to avoid buying U.S. Treasury bonds.

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While rate cuts may boost the bond market, investors have divergent views on the pace of Federal Reserve cuts due to the strong performance of the job market. Uncertainties persist in the fixed income market. Bloomberg strategist Simon White highlighted that the term premium on longer-term U.S. Treasuries will increase, liquidity risks have intensified, and could deteriorate further.

Additionally, the MLIV Pulse macro strategist survey also revealed limited enthusiasm among investors for the traditional safe-haven asset, the U.S. dollar. 80% of respondents expect the dollar to remain stable or decline by over 1% by year-end. The survey was conducted from September 23rd to 27th and included portfolio managers, economists, and retail investors. This week's survey also inquired about whether commercial real estate debt has passed its worst phase.

Editor/Lambor