In This Issue

• Investors are most worried about a Fed misstep, new survey shows
• The most popular type of investment today
• Bill Ackman quits activist short-selling campaigns

• Reminder: CNBC's Delivering Alpha conference is on Sept. 28 in New York City

Delivering Alpha Quarterly Investor Survey  

We polled about 400 chief investment officers, equity strategists, portfolio managers and CNBC contributors who manage money this week about where they stood on the markets for the rest of 2022. 

BlackRock’s Larry Fink, Pershing Square’s Bill Ackman and Oaktree’s Howard Marks are just some of major investors who have called out what they believe to be the decoupling of economies across the world – the end of globalization. I’ve had numerous meetings with investors and executives over the last few weeks, who echo these concerns. 

No one knows the extent to which deglobalization will occur and what the overall impact will be, but most agree it will be additive to the inflation that’s already seething through the economy. 

Given all of this, I was surprised to see that 89 percent of the 400 investors probed in the new CNBC Delivering Alpha survey did not change their investing strategy as a result of Russia’s invasion in Ukraine. Separately, they were asked whether the war will alter the Fed’s planned rate hikes, and nearly half of respondents believe it “won’t impact Fed policy much.” 

Perhaps, this is because something like “deglobalization” is difficult to measure and model. Or maybe it’s because the severing of economic ties (Russia aside), if it occurs, would take years and possibly decades, and wouldn’t be reflected in present values. Or, it’s likely that at least some of these investors are in the camp that "deglobalization fears" are overblown. 

Either way, they’re not being shy about investing outside the U.S. While the majority – 55% – think the U.S. will be the best place to park their capital, the rest believe outperformance will stem from emerging markets (29%), international developed markets (8%) and China (8%). In other words, investors aren’t completely shunning other markets quite yet, and they actually see opportunity in them. 

When we spoke with Gramercy Funds’ CIO Robert Koenigsberger for this newsletter a few weeks ago, he noted that all markets will not be treated equally in light of the events in Europe. 

“Immediately, you can start to see winners and losers within emerging markets,” Koenigsberger, who runs $5.5 billion for his emerging markets investment firm. “You start with oil, you start with commodities, you try and figure out which side of a country or corporation might be on that.” 

The example he gave was that there are some places like Mexico that are exporting oil; some places like Turkey, that are importing energy. 

It appears that investors in our recent survey took that advice. When asked which three sectors will be the biggest winner in 2022, the most popular choice was energy, with 70 percent selecting it. 

Investors believe the biggest threat to the markets now is a Fed misstep, CNBC survey shows

A majority of Wall Street investors believe the biggest threat facing the markets right now is a policy error by the Federal Reserve as the central bank wrestles with taming decades-high inflation, according to the new CNBC Delivering Alpha investor survey. 

Forty-six percent of the 400 survey respondents said a Fed misstep could have the potential to derail the bull market, while 33% said surging U.S. inflation poses a major threat. Eleven percent listed further aggression from Russia after its invasion of Ukraine as the biggest threat to the markets

Earlier this month, the Fed approved a 0.25 percentage point rate hike, the first increase since December 2018. The central bank also signaled that it will raise rates 10 times — in less than two years — and cut what likely will be trillions off the balance sheet.

Fed Chairman Jerome Powell recently vowed tough action on soaring prices, indicating he's open to rate hikes more than the traditional 25 basis points.

Many notable investors are skeptical that the central bank will be able to engineer a soft landing even with a stronger economy.

Famed investor Carl Icahn recently said he sees a "rough landing" and said that there "very well could be a recession or even worse" even the sky-high inflation and elevated geopolitical tensions.

The so-called bond king Jeffery Gundlach has criticized the Fed's role in fighting inflation, saying that the recent readings made the Fed's 2% target look "laughable."

The investor expects the consumer price index to peak at 10% potentially and end this year at 7.5%. The CPI for February, which measures the costs of dozens of everyday consumer goods, rose 7.9% compared with a year ago, the highest reading since 1982.

As for their market outlook, most investors (58%) see flat returns for the S&P 500 in 2022, while 36% believe the equity benchmark could rise about 8% to end the year above the 5,000 level.

Only 6% sees a correction before the year-end to take the S&P 500 below 4,000.

Delivering Alpha Headlines

Big thoughts from the big money

Bill Ackman is done with activist short-selling

Investor Bill Ackman said he will no longer take part in vocal activist short selling campaigns, adding he’s ready to take his firm to the next era to focus on long-term, “quieter” bets. “Despite our limited participation in this investment strategy, it has generated enormous media attention for Pershing Square. In addition to massive amounts of media hits, our two short activist investments managed to inspire a book and a movie,” Ackman said in his annual letter. “Fortunately for all of us, and as importantly for our reputation as a supportive constructive owner, we have permanently retired from this line of work.” The decision came years after his five-year battle against Herbalife ended with massive losses in 2018. The founder and CEO of Pershing Square Capital Management had placed a big bet against the nutritional supplement maker he accused of running a pyramid scheme.

Gundlach warns don’t believe the people who say the yield curve doesn’t matter

DoubleLine Capital CEO Jeffrey Gundlach said investors should take yield-curve inversion seriously as the indicator has proven its accuracy over the decades. The so-called bond king urged investors to not believe those who downplay the significance of the bond-market phenomenon. “Right on cue, the ‘It Doesn’t Matter This Time’ white papers are coming out,” Gundlach said in the tweet. “Don’t believe them.” The spread between the 2-year and 10-year Treasury yields narrowed perilously close to inversion Tuesday. 

Carl Icahn is expanding his animal-welfare campaign to Kroger

Carl Icahn is expanding his animal-welfare campaign to the nation’s largest supermarket chain, Kroger, after the famed activist investor initially targeted McDonald’s. Icahn has submitted a plan to nominate two candidates to Kroger’s board, the Cincinnati-based company said in a release Tuesday. Kroger said it first heard from Icahn on Friday. The grocer said that during the discussion, the billionaire investor “voiced his concerns regarding animal welfare and the use of gestation crates in pork production.”