Summary of Institutional Views on Financial Markets on May 4

On May 4, institutions summarized their views on the stock market, commodities, foreign exchange and central bank policy prospects.



1. Well-known bears expect the S&P 500 to drop another 700 points;

After already falling 13% in 2022, the S&P 500 is in danger of further declines in the coming months, according to the technical and macro research team at Strategas Research Partners. The agency's team, led by Chris Verrone, is closely monitoring the risk of a decline towards the 3500-3700 area. The range includes the S&P 500's 200-week moving average and the midpoint of the entire gain from the market bottom during the 2020 pandemic. That pessimism was echoed by Morgan Stanley's Mike Wilson, who expects the S&P 500 to fall to at least 3,800 and possibly as low as 3,460, nearly 700 points lower than Monday's close.

2. Bank of America: The level of pessimism among retail investors in U.S. stocks hit a new high since 2009;

Stephen Suttmeier, a technical research analyst at Bank of America, said in a report that retail investors in U.S. stocks are now terrified. From the survey data of the American Association of Retail Investors (AAII), 59.4% of retail investors surveyed are pessimistic about the future, a record high in 2009. A new high since March, and March 2009 also happened to be near the bottom of US stocks during the global financial crisis. While pessimism has some investors expecting a rebound in the S&P 500, Suttmeier warned that weakness in indicators such as credit market indexes suggests the S&P 500 could still hit new lows of 3,800 to 4,000 this year.

3. Pimco warns that the bond market is facing multiple adversities and recommends investing in the stock market now;

Bond markets will continue to face inflation and central banks tightening monetary policy, so stocks are a better bet at this stage of the economic cycle, Pimco said in its May asset allocation outlook. While the current economic cycle means "we prefer equities to bonds and corporate credit, if the economy slows further, we expect bonds to become more attractive," Pimco said.

4. Analysts at JPMorgan Chase said the bearish fear of U.S. stocks is overdone, and a rebound is expected;

Negative sentiment in U.S. stocks has become so overwhelming that a rebound may be imminent, strategists at JPMorgan said. Analysts led by Marko Kolanovic noted that the closely watched American Association of Individual Investors survey hit its most pessimistic level since early March 2009. Investor sentiment reached extremely subdued levels, strategists at JPMorgan wrote. This, coupled with better-than-expected first-quarter earnings, should give the market a rebound. JPMorgan's team believes investors' concerns are overdone. As global growth is expected to rebound in the second half of the year, the U.S. economic expansion is weakening but not derailed

5. BlackRock: The Fed is expected to raise interest rates by 50 basis points this week;

Rick Rieder, chief investment officer of global fixed income at BlackRock, expects the Fed to raise interest rates by 50 basis points on Thursday;
At some point in the future, the Fed may increase the pace of rate hikes if it feels it is necessary

6. JPMorgan analysts say there's a one-in-five chance the Fed will raise rates by 75 basis points this week, though the market hasn't yet priced in that possibility

7. ANZ: The Federal Reserve is expected to raise interest rates by 50 basis points, while announcing quantitative tightening;

We expect the Fed to raise rates by 50 basis points and simultaneously announce quantitative tightening, which will shrink the balance sheet at a rate of about $95 billion per month. We expect a period of restrictive interest rates to be necessary based on the current level of apparently excessive demand in many areas of the economy. We have raised the fed funds rate path by 50 basis points, including consecutive 50 basis point hikes in June and July, and now expect the upper end of the target range for the fed funds rate to reach 2.75% by year-end, in line with our neutral estimate. We also expect a final rate of 3.75% by June 2023, 50 basis points higher than our previous forecast."

8. Scotiabank: The Fed's rate hike of more than 50 basis points will shock the market;

The Fed is expected to raise the target range of federal funds by 0.5 percentage points this time to a range of 0.75%-1.0%, and will also implement a plan to shrink its balance sheet. Markets will be surprised if rates are raised by more than half a percentage point. One thing to watch is whether there are signs of a shift in the interpretation of inflation drivers and whether they are considered persistent drivers. There is no indication from the March dot plot that the Fed plans to pause rate hikes any time soon. Risks to inflationary pressures remain skewed to the upside, potentially leading Chairman Powell to maintain a hawkish stance

9. Analyst of precious metals dealer Jintuo: The Fed's aggressive monetary policy is unlikely to be able to curb inflation;

Analyst Gary Wagner said that historically, years of excessive inflation have also been accompanied by interest rates well above the Fed's 3% to 3.5% target rate. Raising interest rates by 3% seems highly unlikely to significantly reduce inflationary pressures and bring inflation expectations back to acceptable target levels. In addition, the current inflationary pressure is mainly caused by the rising cost of energy, food and housing caused by supply chain problems, and raising interest rates will not solve the individual's demand for basic goods such as food and housing. With the Fed clearly behind the curve and monetary policy less aggressive than in the past, it seems highly unlikely that the current course of action will have any significant impact on inflationary pressures

10. Morgan Stanley: The Fed will raise rates by 50bps this week, and they seem determined to do so to curb inflation

11. Mark Cabana, head of U.S. short-term rate strategy at Bank of America: What the market really cares about is the prospect of the Fed raising interest rates, especially the possibility of a 75 basis point hike

12. Goldman Sachs: The RBA is expected to raise interest rates by 50 basis points in June and July, and will raise the cash rate to 2.6% by December 2022

13. Mitsubishi UFJ: GBP/USD is oversold, the fundamentals support further weakening;

Technical indicators show that GBP/USD is severely oversold in the short term, increasing the odds of a small rebound. Additionally, a cautious message from the Bank of England should support a weaker pound in the week ahead. Sterling faces potential selling pressure following the UK's May 5 local elections. If the Conservative Party underperforms expectations, Prime Minister Boris Johnson faces a higher probability of a vote of no confidence, and rising political uncertainty will add to bearish sentiment on the pound

14. Credit Suisse: The United States and Japan must hold 128.44-34 to see above 131.25-35 and 132.20;

Credit Suisse economists report that the dollar may be approaching its recent peak against the yen. Support is initially seen at 129.70-60, then 129.31, with key near-term support seen at the 13-day exponential average and price support at 128.44-34. This needs to be held on a close basis to see above 131.25-35 and 132.20

15. Derek Halpenny, Economist at Mitsubishi UFJ: We believe that in this stage of the Fed raising interest rates by 50 basis points (certainly in May and June), the dollar has room to strengthen further, but the current dollar strength is definitely more limited.

16. ING Bank looks forward to the Bank of England interest rate resolution: 8-1 votes in favor of raising interest rates by 25 basis points;

The baseline situation is to predict that the Bank of England will vote 8-1 in favor of raising interest rates by 25 basis points, raising inflation expectations but lowering economic growth forecasts, and the unemployment rate is expected to rise gradually. The Bank of England is expected to reiterate that it will further raise interest rates “dvdly” in the future, with risks to the upside or downside. Bank of England prefers to start active bond sales

17. Spanish International Bank: The Bank of England will reverse its tightening policy next year;

The Bank of England could reverse some of this year's tightening by May next year as growth takes a hit. The Bank of England's chief economist in the UK, Clark, said the Bank of England could raise interest rates twice in May and June this year, by 25 basis points each, up to 1.25%, before cutting rates next year. "We maintain a pessimistic assessment of the UK economic outlook, with demand expected to weaken significantly in the coming months." She expects the Bank of England to pause rate hikes in August before cutting rates in May 2023 to boost growth

18. Kallum Pickering, senior economist at Berenberg Bank: The Bank of England's interest rate hike highlights recession risks;

The Bank of England is likely to raise interest rates again on Thursday, raising the risk of policy mistakes. Kallum Pickering said that in the short term, inflation will exceed the Bank of England's expectations, all because of higher commodity prices and evidence of a pullback in household demand. “From a policy-related perspective, say two years from now, the shock from the Russian-Ukrainian crisis could dampen demand growth and could also affect inflation dynamics over time. Unfortunately, the UK is already in the early stages of a recession. ," he said, in which case officials would be better off keeping policy unchanged until data performance indicates an appropriate response