Investors ‘Gradually Becoming More Bearish’ on the US Economy, BCA Poll Reveals

A recent survey conducted by BCA Research indicates a notable shift in investor sentiment, with a growing bearish perspective on the U.S. economy.

The research shows that investors are increasingly doubtful about the market’s capacity to maintain its recent gains. According to the report, “Only a sliver of respondents expect the market to continue to rally into year-end.”

While many investors are holding cash reserves that could be utilized if the economic outlook improves, there is a marked decrease in enthusiasm for high-profile stocks. The so-called “Magnificent Seven,” a group of prominent tech stocks, appear to be particularly impacted, as only a few respondents indicated they would consider purchasing them at this time, signaling a decline in confidence.

BCA Research also assesses the Federal Reserve’s recent aggressive easing measures, acknowledging their necessity while suggesting they may not fully prevent an economic downturn. They note that “long and variable lags will get in the way of preventing a downturn,” and while a soft landing seems somewhat more probable, achieving this outcome relies heavily on favorable circumstances.

The firm points out that improvements in productivity, a revival of consumer confidence, increased spending, and better corporate margins could all contribute to a more positive economic landscape. Nevertheless, they caution that the overall outlook remains uncertain despite projected strong earnings growth.

The report warns that “earnings often come down only after the onset of a recession,” highlighting that many small businesses are already seeing contractions in both sales and earnings. This suggests that the broader economic conditions may not support the optimistic earnings forecasts observed in certain sectors.

Moreover, BCA Research notes that the investment outlook is further complicated by economic risks and uncertainties surrounding upcoming elections. They recommend an overweight position in pharmaceuticals, utilities, and telecommunications, while advising a reduced allocation in consumer discretionary and technology sectors.