Federal Reserve

Expect higher interest rates and smaller gain for stocks in 2018: CNBC survey

Key Points
  • Respondents to the CNBC Fed Survey marked down their outlook for the S&P 500 in March for the first time since July.
  • They are also more concerned about additional Fed rate hikes this year.
  • The median respondent to the survey sees three rate hikes this year and two next year. But the second most-chosen answer is four this year and three in 2019.
Andrew Kelly | Reuters

Look for higher interest rates and lower stock prices in 2018.

That's the message in the CNBC Fed Survey for March, in which participants also show building concern about additional Fed rate hikes this year.

The average forecast sees the yield on the 10-year benchmark Treasury ending the year at 3.17 percent and rising to 3.54 percent next year, about a quarter-point higher than the forecast in December.

"When the 10-year goes above 3%, we'll finally realize the enormous burden we face servicing the national debt," wrote Peter Tanous, chairman of Lynx Investment Advisory:

The median respondent to the survey sees three rate hikes this year and two next year. But the second most-chosen answer is four this year and three in 2019, suggesting that the risks are to the upside when it comes to rate hikes.

The Fed funds rate is forecast to rise to 2.23 percent this year and 2.85 percent next year.

"The Fed will raise rates at the March meeting, and begin to signal in the pronouncement and future commentary that four hikes in 2018 is the new expectation of the committee,'' said Rob Morgan, chief investment officer at Sethi.

Morgan is one of the survey's 40 respondents, who include economists, fund managers and strategists.

Andrew Kelly | Reuters

Most respondents to the CNBC survey said they were unconcerned by the recent market volatility, with 60 percent saying it represents a healthy part of the market cycle and 73 percent saying it hasn't changed their view on stocks. But respondents marked down their outlook for the in March for the first time since July.

The S&P is now seen ending the year at 2,839, about 5 percent higher than the current level but down from the January forecast of 2,937. For 2019, the average forecast fell to 2,928, from 3,005 in January.

The growth in outlook for GDP is pretty much unchanged, at 2.76 percent for the year in 2018 and 2.72 percent for next year.

Respondents to the survey also said a looming trade war is their greatest concern.