Due to both the fast pace of tightening as well as the stubbornness and inflation, most believe that the Fed cannot achieve a soft landing. When asked if lowering inflation by 2% would lead to a recession 57% answered yes, 33% stated it wouldn’t, and 10% said they didn’t know. The average month that people think will lead to a recession will be August 2023. 53% of those who believe it are coming say it will not be severe, while 43% predict it will milden.      

Robert Fry of Robert Fry Economics LLC stated that while he still believes that there will be a recession to bring inflation down to the Fed’s target of 2%, the increase in market rates in anticipation of Fed tightening has decreased the likelihood of that recession. He also indicated that it had slightly raised the chance of the Fed achieving a soft landing.

Joel Naroff from Naroff Economics says: “The likely outcome is that things worsen and last longer than expected. It is therefore highly unlikely that the Fed will manage to make a soft landing.” It will only happen by pure luck.

The probability of a recession in the next twelve months increased just slightly to 35%, from 33% according to the previous survey. Europe saw a two-point increase in recession probability over the following year, now standing at 53%. The economic downturn resulting from the Ukraine conflict has had a much more severe impact on Europe.

The recent change in policy has caused Jerome Powell, Fed Chair, to lose his overall rating. Respondents gave Powell straight A’s during the pandemic for his leadership in economic affairs. Now, his overall rating is B-. Powell saw his rating drop in four out of eight categories, with the largest decline in economic forecasting. He also saw a slight drop in his grade on economic competence and overall monetary policies. His scores for transparency, leadership and communication were higher.

Richard Bernstein, the CEO of Richard Bernstein Advisors wrote that it was incredibly strange to believe Fed Chair Powell has control over inflation. The real fed funds rate has been historically negative, even though inflation is at its highest point in over 40 years. A negative real fed funds rates is not a good way to combat inflation.

Inflation: 74% believe it has peaked. This is up from 7% in March’s survey. However, most respondents don’t think the Fed can achieve its 2% goal until 2024. CPI forecasts that the CPI will end 2019 at 5.6%. This is 4 tenths more than the previous survey. It will also end 2023 with 3.3%.

With GDP forecasts falling 70 basis points on March to 2.2% (a decrease of 2.2%), the growth outlook for this year has dropped sharply. However, 2024’s average declined 30 basis points and fell to 2%. The average forecaster for a recession was 1.6%, while those who believe the Fed will fight inflation will shrink the economy were at 2.4%.

Despite calls for recession and a downgrade to growth, survey respondents see some equity upside: specifically, 5% this year and 8% next year for the S&P 500 from current levels. For the first time since we’ve asked the question, the CNBC Risk Reward Ratio — which nets out the possibility of a 10% increase or decrease in stocks over the next six months — is balanced at zero. This ratio is negative for the five previous surveys. The group believes stocks remain overvalued in comparison to their prospects for earnings growth.

Hugh Johnson from Hugh Johnson Economics said that “the current correction in equities in an ongoing bull markets is not accompanied by an economy contraction.” We are likely to be within 4%-7 % of the bottom, and the upside once the correction is over will be between 4.5%-7.5%.