According To Investors, Stock Market Losses Are Set To Continue, And Cash Is The Best Form Of Haven

After having enjoyed a positive first quarter, Wall Street investors believe the stock market is heading for losses as it is seen as one of the most reliable safe havens at this time, as indicated by a new survey conducted by Trade Algo.

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There were about 400 chief investment officers, equity strategists, portfolio managers, and Trade Algo contributors that monitor the markets for the second quarter as well as in the future, who were asked about their outlook for the markets. A survey was conducted in the past week to gather the data. 

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A majority of the respondents predicted that the S&P 500 would decline in the near future. Thirty-five percent of the respondents said that missteps by the Federal Reserve would pose the greatest risk to the market this year, while another 32% said persistent inflation would be the biggest risk.

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While the market has faced a banking crisis and continued Fed tightening, it has shown remarkable resilience so far. Despite the government's emergency rescue measures that helped stem the chaos in the banking industry, the S&P 500 is on track to post a winning quarter, up more than 5%.

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A chief global strategist at LPL Financial, Quincy Krosby, said that recession fears are still fueled by economic concerns because the yield curve still serves as a counterbalance to the market's climb upward. Despite a wall of worry that seems to grow higher with each new headline, the market continues to rise, which raises the question of who's right.

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Earlier this week, the Fed raised interest rates by a quarter percentage point and signaled that one more rate hike would occur this year. As a result of more rate hikes, the central bank needs to reverse course right away, causing the escalation of banking problems and the severe economic slowdown that will follow. It is worth noting, however, that Fed Chairman Jerome Powell stated explicitly that rate cuts are not his starting point.

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A number of analysts have been predicting that a recession is imminent, but Jeffrey Gundlach, CEO of DoubleLine Capital, has also predicted that interest rates will be lowered “substantially” in the near future. According to Morgan Stanley's chief investment officer, Mike Wilson, the market is overly optimistic about corporate earnings at the moment, and there is a severe deterioration on the way that will cause stocks to fall.

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Approximately 60% of investors said that cash was the haven they had at the moment, even though they were in a bearish market at the moment. During the recent banking turmoil, money market funds have seen significant inflows, which led their assets to reach an all-time high, $5.2 trillion, according to the Investment Company Institute, as of Wednesday.

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Jared Woodard, Bank of America's Investment & ETF Strategist, said in a note that the 'option value' of cash continues to rise and that money markets yield over 4% are hard to resist in advance of a slowdown.

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According to Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs, the banking stress has triggered a sharp reversal in risk appetite around the world, causing a preference for cash over equities.