Wall Street Professionals Increasingly “Nervous” About “Yield-Led Global Accidents”

Wall Street Professionals Increasingly “Nervous” About “Yield-Led Global Accidents”

A new market survey of Deutsche Bank clients finds smart money anticipates economic trouble ahead as extreme hawkish policy by central banks could trigger a ‘bigger financial accident’ and or ‘serious financial stress.’ 

Deutsche Bank’s Jim Reid wrote in the note that a global financial market survey was conducted between Oct. 3-6 and had 410 client responses worldwide. He said, “We take a look at expectations of central bank policy error, US recession risks, and financial market forecasts.” 

The first question in the survey asked, “From its current levels, will the next 100bps move in 10yr USTs be higher or lower? (yields averaged c.4.75% during the survey).” 

Most respondents (75%) believe the next 100bps move in the US 10-year bond yield is down. 

When asked, “From its current levels, will the next 10% move in the S&P 500 be…”

Respondents overwhelmingly said S&P500 will fall by 10% versus a 10% rise. Reid commented on this and said, “The pessimists won again in the October survey.” 

The next question asked when respondents expected a US recession to occur. 

The result, as per Reid, “On a US recession, since we last asked in June, even more of our respondents have pushed out their expectation of recession to 2024, from 48% to a strong majority at 71%. This has reduced the number for YE 2023 from 39% to a mere 9%. 82% still expect a US recession by YE 2024 but this is down from 89% in June.”

Reid noted in another survey question that “Our respondents are nervous about yield-led global accidents.” 

When asked, “What do you think is the likelihood of Donald Trump being the US President after the 2024 US election?”

Reid said, “The weighted average of our respondents who see it as increasingly likely that Trump will make a reappearance as President after the 2024 election jumped up 10pp from 36% in June to nearly half (46%) in October 2023. Nearly 10% see the likelihood to be over 80%.”

Survey results show smart money is preparing for a Fed-induced financial accident that may tip the US economy into recession next year.

More in the full survey available to pro subs.

Tyler Durden
Tue, 10/10/2023 – 05:45 Source

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