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The biggest risks to stock market in 2023: Deutsche Bank survey

Markets remain on edge regarding the outlook for inflation, as seen in the hit to stocks last week amid a hotter than expected read on the Producer Price Index (PPI).

Furthermore, this week's Federal Reserve meeting could feature Chairman Jerome Powell pushing back on recent financial easing in markets.

Couple those factors with expectations for muted corporate profit growth and a recession in the U.S., and uncertainties for the stock market in 2023 are abound.

The team at Deutsche Bank led by veteran strategist Jim Reid looked to quantify the biggest risks to stocks next year in a new survey, conducted from Dec. 7 to Dec. 9 and featuring responses from 856 financial professionals.

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Here are three charts that stood out to Yahoo Finance:

Chart #1: The biggest risks to market stability

A worse-than-expected recession takes the top spot as the biggest market risk next year, according to Deutsche Bank's poll.

Interestingly, only 6% of market participants see China's exit from COVID as a big risk — odd as stocks have swung violently the past two months on China COVID re-opening concerns.

Pick a risk, any risk...
Pick a risk, any risk. (Source: Deutsche Bank) (Deutsche Bank)

Chart #2: Beware of stagflation

Slow economic growth and elevate unemployment along with still high inflation — better known as stagflation — is a key market risk in 2023 that has investors on edge.

A majority of those surveyed expect high or very high stagflationary risks in the U.S. (62% versus 33% in an Oct. 2021 survey), Europe (86% versus 42%), and the UK (92% versus 63%).

Be on the lookout for stagflation.
Be on the lookout for stagflation. (Source: Deutsche Bank) (Deutsche Bank)

Chart #3: About that recession

The degree of pain involved in the next recession is a big topic in 2023.

Respondents saw a 78% chance of a U.S. recession in 2023, which is roughly in line with what financial markets pros said when surveyed by Deutsche Bank in September.

Here comes the recession?
Here comes the recession? (Source: Deutsche Bank) (Deutsche Bank)

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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