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Majority of Investors Expect US Recession Before 2024, Favors Long-Term US Treasuries

A clear majority of investors, about two-thirds of the 410 respondents in the latest Markets Live Pulse survey, predict a US recession by the end of 2024.

This outlook has led them to view the current bull market in stocks as short-lived and to favor long-term US Treasuries. The survey respondents appear to be looking beyond the economy’s current resilience and anticipating further damaging effects from the Federal Reserve’s cumulative tightening of 5.25 percentage points over the past 16 months.

The Fed’s recent rate hikes, with Chair Jerome Powell signaling more, are possible, have bolstered investors’ belief in rate cuts in 2024.

Investors find value in long-term Treasuries, despite the recent bond market slide and Fitch Ratings’ downgrade of US sovereign debt. Traders expect the central bank to cut interest rates multiple times in 2024, making long-maturity debt attractive.

Almost 60% of respondents see it as a good time to buy Treasury securities with maturities longer than seven years. The survey results, however, signal a challenging backdrop for US stocks, with 47% of respondents viewing the market as a bubble powered by irrational exuberance.

While European investors are more pessimistic about US stocks than their North American peers, the survey highlights the complexity of the macroeconomic risks investors face. About three-quarters of respondents expect core inflation to remain above 3% in the next 12 months or to dip below 3% and rebound.

This contrasts with the bullish outlook on long-maturity Treasuries and market bets on rate cuts, suggesting concerns about equities amid a potential easing of policy despite elevated inflation levels.

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