Professional investor poll: biggest risks and market forecasts for 2023

Find out what market professionals think about growth, stock market performance, interest rates and China over the next 12 months.

A bearish survey of more than 850 market professionals has highlighted their expectations for stagflation, a cycle low for the S&P 500 index and for no rate cuts in 2023.

Nearly half of respondents to Deutsche Bank’s global poll, which took place between Wednesday and Friday last week, identified the biggest risk to market stability as being that impending recessions prove more severe than anticipated.

Higher-than-expected inflation and more aggressive tightening by the US Federal Reserve each registered responses above 30%.

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On stagflation, which is the term used to describe no growth and high inflation, the risk of this happening in the US is seen as high or very high by 62% of respondents.

The answer to the same question jumps to 92% for the UK, where a majority of 56% also see high or very high stagflationary risks over the next three to five years.

There’s a strong consensus that the US recession will begin in the first half of the year, with most also expecting the S&P 500 to hit its cycle low in 2023 following its decline of 17% so far this year.

A return of minus 2.2% is forecast on average for next year, compared with the 4.2% improvement predicted for 2022 in last year’s survey.

A third of respondents are bracing for a pull back by the S&P 500 of 10% or more in 2023, but with a quarter optimistic about growth of 10% or above.

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On interest rates, there’s a noticeable skew towards a higher eventual peak for this cycle than is currently in Wall Street forecasts. The Fed fund rates, which stood at 3.75-4% ahead of this week’s policy meeting, is backed by 44% to peak at or above 5.5% with an average view of 5.3%.

Most also expect policy to stay restrictive, with a majority for each of the Federal Reserve (68%), European Central Bank (78%), and Bank of England (67%) expecting no rate cuts in 2023 from those central banks.

A slight majority think China’s reopening after Covid disruption will be inflationary, though a strong contingent anticipates the easing on supply chains will mean it is disinflationary.

Not many were optimistic about Bitcoin, which has reversed in price this year from $48,000 to the current $17,000. Asked whether the crypto asset is more likely to double or halve in price next year, 78% chose the latter.