Investors are “gradually becoming more bearish” on the US economy, the BCA By Investing.com survey shows

Investing.com — A recent survey by BCA Research reveals a shift in investor sentiment with a bullish outlook on the US economy.

According to BCA Research, investors are increasingly skeptical about the market’s ability to sustain its recent gains.

“Only a fraction of respondents expect the market to continue to recover until the end of the year,” the note said.

The BCA’s findings indicate that while many investors hold cash reserves that could be tapped if the economic outlook improves, there is a noticeable waning of enthusiasm for high-profile stocks.

The ‘Magnificent Seven’ – a group of top technology stocks – are said to be particularly hard hit, as the BCA survey suggests, “Only a few respondents would buy them today”, suggesting a loss of confidence in these once favored stocks.

The Federal Reserve’s recent aggressive easing policies are considered necessary but insufficient to completely prevent a recession.

“Long and variable lags will prevent a decline,” explains BCA Research. “Although a soft landing is somewhat more likely now, that outcome depends on a lot of luck,” they add.

“However, it could bring continued improvement in productivity, revival of ‘animal drink, more consumer spending and improvement in corporate margins,'” says BCA.

Despite the expected strong earnings growth, the firm says the outlook remains uncertain.

The research firm warns that “earnings often fall only after the onset of a recession,” noting that most small businesses are already experiencing sales and earnings contractions.

This suggests that broader economic conditions may not be in line with the bullish earnings forecasts seen in some sectors, according to the BCA.

In addition, BCA Research says the investment outlook is clouded by economic risks and electoral uncertainties.

“The outlook for equities is compounded by rising economic risks and electoral uncertainty. Overweight pharmaceuticals, utilities and telecoms, underweight consumer discretionary and technology,” they conclude.