CNBC Fed Survey: Growing Concern Over Market Valuation and Fed Rate Cuts

Market Valuation Concerns

• 📈 Respondents to the CNBC Fed Survey express the highest level of concern about stock market overvaluation in about a year.
• 📊 70% of respondents believe the market is at least somewhat overpriced, with 14% stating it is significantly overpriced, totaling 84%.
• 📉 The average respondent expects the S&P to be flat or down from current levels by year-end, though a 9% gain is projected for the following year.

Federal Reserve Rate Cut Expectations

• 📉 Two interest rate cuts are priced in for this year and two for next year, totaling approximately 1 percentage point in cuts expected through 2026.
• ⚠️ Little relief is expected on the long end of the curve, with the 10-year Treasury yield seen ending the year near current levels and only slightly declining through 2026.

Inflation and Tariffs

• 💡 A growing belief among respondents is that tariffs will result in one-time price hikes, with 51% holding this view, up from 43% in June.
• ⚠️ However, 27% still see tariffs as a path to broader inflation, with tariffs remaining the number one risk to economic expansion.

Fed Meeting Outlook

• 🎯 No change is expected at the current Federal Reserve meeting, but 65% anticipate a rate cut in September.
• 💬 The tone from Fed Chair Powell could become more amenable to cutting rates if inflation numbers remain benign, though this may also depend on the accompanying statement.