Risk appetite among US stock market investors slid in September to a 16-month low, extending a trend of deteriorating sentiment in recent months, according to the latest results from S&P Global's Investment Manager Index survey.

The survey's Risk Appetite Index dropped to minus 29% in September from minus 10% in August, the lowest reading since May 2023. Investor sentiment has now eroded for four straight months, falling drastically from the two-and-a-half-year high of 28% recorded in May 2024.

About 53% of surveyed investors expected US equities to lose value over the 30 days following the Sept. 6 end of the survey period.

While over half of those surveyed believe that the US will avoid a recession over the next 12 months, about 43% said they expect a recession. This is the highest proportion of respondents to report expectations of a recession since December 2023.

Concerns over politics, valuations persist

Investors continued to express concern that politics and equity valuations posed the greatest risk to near-term market returns, with negative survey index readings of minus 73% and minus 70%, respectively.

With the US presidential election nearing in November, the September index reading for political environment was at the lowest since May 2023. The index reading for valuations was the worst in three years and follows an early August technology stock sell-off and investor disappointment in key earnings results from companies with large market capitalization, such as NVIDIA Corp.

Conversely, surveyed investors expressed continued optimism that central bank policy would have a bullish influence on near-term returns. The index for central bank policy sentiment climbed to 5% in July after five months of negative readings, and then jumped to 35% in August and 49% in September.

US Federal Reserve Chairman Jerome Powell sent a strong signal in August that interest rate cuts would begin in September, likely influenced by recent US employment data. About 86% of the Investment Manager Index survey respondents anticipated the Fed will cut its benchmark interest rate between 50 basis points and 75 basis points by the end of the year.

S&P Global's Investment Manager Index survey includes monthly responses from a panel of just under 300 participants employed by firms that collectively represent approximately $3.500 trillion in assets under management. Data was collected Sept. 3–6. If you would like to receive the full report on a regular basis or participate as a panel member, please email economics@spglobal.com.

Regarding other key risks to near-term results, investors expressed less concern toward US and global macroeconomic growth than the previous month, though index readings for both factors were still negative.

Investor sentiment flipped to bullishness in September for equity fundamentals with a positive index result after a negative reading in August.

Interest in defensive sectors persists

Bullish sentiment in September continued to trend toward defensive stock market sectors. Similar to August's survey, investors were most optimistic about the healthcare, utility and consumer staples sectors. However, the index for the utility sector slipped from August to September.

The basic material and consumer discretionary sectors remained the two most bearish categories for investors over the 30-day period following the end of the survey, while the energy sector posted the biggest index drop to minus 26% in September from 7% the previous month.

Overall, investors were supportive of six of the market's 11 sectors in September.