Deutsche Bank’s survey showed investors expect a pullback before the end of the year

Spark global limited reports:

London — Most investors expect a 5 percent to 10 percent correction in the stock market by the end of the year, according to a Survey by Deutsche Bank.

The firm’s monthly survey, conducted in early September, covered more than 550 market professionals worldwide. According to the survey, 58 per cent of respondents expect a 5-10 per cent market correction before the New Year. In addition, 10 per cent expect a correction of more than 10 per cent.

By contrast, only 31% said there would be no pullback. Last month, Citigroup said stocks were vulnerable to a 10% correction, driven by speculative tech stocks.

The S&P 500 is up about 18% since the start of the year, while the tech-heavy Nasdaq is up about 19% over the same period. In Europe, the Stoxx 600 index is up 17 percent since January.

These results are largely due to improved health conditions in many Western economies since the start of the year. However, there are concerns that economic conditions will worsen in the months ahead.

The growing number of COVID-19 infections in the United States has forced businesses to delay rework. In addition, British consumers are running short of supplies, leaving empty shelves in grocery stores. There are also questions about the future of inflation and central banks’ stimulus policies during the pandemic.
Respondents said the coronavirus pandemic remained their biggest concern going forward, but higher-than-expected inflation came in second. One reason behind this is that if consumer prices remain high for a long time, then this will prompt central banks to loosen stimulus measures more quickly, affecting financial markets.

The survey also showed inflation expectations for the next five years at around 2.6%, with an overwhelming majority of investors seeing the consumer price index slightly above the Federal Reserve’s target.

Jerome Powell, the Fed chairman, said in August that the fed would allow inflation to rise above its standard 2 per cent target before raising rates. More recently, Powell said the central bank could begin removing covid-19-related stimulus measures by the end of the year.


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