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(Bloomberg) — U.S. stocks will outperform the nation’s government and corporate bonds for the rest of this year as the Federal Reserve continues to cut interest rates, according to the latest Bloomberg Markets Live Pulse survey.

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Exactly 60 percent of the 499 respondents said they expect U.S. stocks to deliver the best returns in the fourth quarter. Outside the US, 59% said they prefer emerging markets over developed ones. And as they step up those bets, they shun traditional safe havens like Treasuries, the dollar and gold.

It’s a risk-based outlook that chimes with bullish calls on Wall Street following the Fed’s half-point interest rate cut this month. China’s biggest stock market rally since 2008, after Xi Jinping’s government stepped up economic stimulus, also helped boost optimism.

“The biggest challenge facing the US economy is actually high short-term interest rates,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “We’re already tilted on risk assets and U.S. stocks,” he said, and “if there was a pullback, we’d even consider adding to that.”

The Fed cut its benchmark rate from a two-decade high on Sept. 18, and the median official forecast projected a further cut of half a point in its two remaining meetings in 2024, in November and December.

“Cutting Rooms”

The MLIV Pulse poll showed 59% expect the Fed to offer a quarter-point rate cut at each of these two meetings. Thirty-four percent anticipate steeper cuts over that period, totaling three-quarters of a point or a full point. This is more in line with swap traders, who are pricing in a total of about three-quarters of a point discount by the end of the year.

Investor confidence that the Fed can project a soft landing has risen, putting the S&P 500 on track to gain in September — historically the gauge’s worst month of the year — for the first time since 2019.

“The Fed has a lot of room to cut, as do many other central banks,” said Lindsay Rosner, head of multi-sector investments at Goldman Sachs Asset Management. “This creates a good backdrop for the US economy in particular. This does not erase the rigor of the assessments, but makes them more justified.”

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When asked which trade is best avoided for the rest of the year, 36% – the largest group – cited buying oil. Crude fell on concerns that rising production outside the OPEC+ alliance will create oversupply next year. In second place he bought treasuries, with 29%.

Treasuries are still on track to gain for the fifth month in a row. And while rate cuts may support bonds, there are plenty of questions about fixed income as views diverge on how quickly the central bank will cut borrowing costs, with the labor market proving resilient. Investors are particularly wary of longer-dated Treasuries given the risk that inflation could heat up again as the Fed eases.

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“The term premium on longer-dated Treasuries is set to rise, while liquidity risks – already heightened as the government runs persistently large fiscal deficits – are likely to worsen.”

– Simon White, Macro Strategist on MLIV

The survey also showed limited enthusiasm for the US dollar, another traditional haven asset. Eighty percent of respondents expect the greenback to end the year either nearly flat or down more than 1%. The Bloomberg Dollar Spot Index is up less than 1% year to date.

The MLIV Pulse survey was conducted September 23-27 among Bloomberg News terminal and online readers worldwide who chose to participate in the survey and included portfolio managers, economists and retail investors. This week, the survey asks if the worst is over for commercial real estate debt. Share your thoughts here.

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