The stock market could continue to tumble in the face of rising inflation and a recession.

A Stifel survey of corporate executives, business owners and investors found an overwhelming share are bracing for a recession. 
Some 97% said a recession is either already happening or will arrive this year or next. 
Separately, top executives have warned earnings could be further dragged down if the US dollar remains high. 

The business community overwhelmingly expects a recession in the next year and a half, with labor woes and inflation among top concerns, according to a survey from Stifel.   

Of the 70 corporate executives, business owners and investors polled, 46% expect a recession this year, 33% see one next year, and 18% said the US is already in the middle of a downturn. Just 3% don’t expect a recession in the next 18 months.

Recession calls have become more regular in recent months as the Federal Reserve hikes interest rates to tame inflation. As a result, Wall Street sees the central bank as more concerned with controlling price pressures as opposed to supporting growth.

But the central bank’s efforts to tame inflation have yet to ease fears. The Stifel survey found that 59% of respondents named inflation as one of their top three risks to their company or investment portfolio. Meanwhile, 64% listed labor constraints, 54% said recession, and 53% said supply-chain disruptions.

But on supply chains, the survey also revealed some positive signs: 59% reported seeing improvement since the end of last year, while 21% saw no change in the situation and 20% said it got worse. 

The findings, which drew mostly from the consumer, retail and diversified industrials sectors, add to other warnings coming from Corporate America. 

In particular, top executives have routinely mentioned the US dollar’s strength as a persistent hammer on the bottom line. The dollar has been on a historic run this year, with US dollar index surging as much as 12% in 2022 to hit a 20-year high, as the Fed hikes rate to rein in inflation. 

In its most recent earnings call, Microsoft said the currency’s climb is complicating both earnings and revenue. 

“The US dollar strengthened throughout the quarter, creating an additional headwind beyond what we shared mid-quarter,” CFO Amy Hood said on July 26.

The strong dollar will remain a drag as the company projects full-year margins to be roughly flat, she added. 

General Electric echoed similar concerns on its earnings call. CFO Carolina Dybeck Happe estimated the dollar will account for a three-point negative hit to the bottom line. And if current interest rates persist, she expects a similar impact for the full year.

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