An equity market correction of 5 percent to 10 percent by the end of the year was the overriding prediction in a September market sentiment survey published by Deutsche Bank today, in a note of caution that the recent equity bull run's days are numbered.
The report surveyed over 550 market professionals globally earlier this month and revealed that 58 percent of respondents said they expected an equity sell-off by the end of the year.
The summer saw markets buoyant as Covid-19 restrictions eased, sentiment and confidence grew, in addition to stimulus from central banks which helped ease the post-pandemic transition. However, recent sessions have seen a correction from those record highs with global markets. The S&P 500 logged its worst week in more than two months last week, and Wall Street indexes also lost between 1.6 percent to 2.2 percent then, with the benchmark index sinking for five straight days.
DB said that economic growth and corporate profits have recovered faster than expected, but now data from the United States and China suggests that recovery may be running out of steam.
COVID-19 was still considered the biggest risk to market stability, with 53 percent of Deutsche Bank survey participants citing concerns over new virus variants that bypass vaccines. This was followed by higher-than-expected inflation.
Very few respondents expected to see full scale lockdowns reinstated, with a majority, 44 percent seeing restrictions either remaining stable or loosening 18 percent.
Around a third of respondents (32 percent) cited strong economic growth not materialising or being short-lived, and a central bank policy error, as risks to market stability.
The Bank also asked respondents about their return to work following the pandemic and found that around one in five people still had not returned to their office since March 2020, when the pandemic triggered lockdowns globally. This number was even lower in the United States at one in three, Deutsche Bank said.