CNBC's Steve Liesman breaks down the latest results from the most recent Fed Survey.

The latest results from the CNBC Federal Reserve Survey indicate a significant increase in the probability of a recession in the upcoming year. According to the survey, the likelihood of a recession has risen to 53%, a substantial jump from January's 22%. The survey also highlights expectations of increased inflation and unemployment alongside lower economic growth. Analysts maintain that the current stock market has not adequately priced in the potential for a recession, with only 3% of survey respondents believing the market is fully priced for a downturn.

The survey revealed that most respondents categorize the stock market as overpriced, with 59% holding this view, up from 53% in March. Despite this, only 10% perceive stocks as underpriced. Moreover, Hugh Johnson of Hugh Johnson Economics suggests that even though equities are undervalued, stock market optimism may be too high, potentially resulting in future price declines.

The survey provides insights into the anticipated actions of the Federal Reserve, which is expected to respond more to economic weakness than to inflation. Divergent opinions persist regarding the timing of a potential rate cut, anticipated either in June or July. In terms of fiscal policy, Thomas Simons of Jefferies projects that tax deregulation policies could potentially foster a positive trajectory for economic growth by the second half of 2026.

Responses in the survey also addressed tariffs, with discussions on how pricing adjustments might be absorbed across the supply chain. Consequently, the consumer could experience varied degrees of price hikes. Despite a universally acknowledged complexity, respondents suggest an intention by companies to pass as much of these costs as possible onto consumers.



Most recent Fed Survey shows surging probability of recession

The Fed kicking off its two-day meeting on rates today. Recession odds have skyrocketed since the beginning of the year. That's according to results from our latest CNBC Fed survey. Let's get to Steve Leastman with those numbers and what they might mean for the Fed decision tomorrow. Morning, Steve. Good morning, Carl. Yeah, the latest CNBC Fed survey shows a surging probability of recession in the next year, an increased outlook for inflation and unemployment and lower growth. And most respondents don't think the stock market is priced for it. Just 3% say stocks are fully priced right now for recession. 52% say somewhat priced and 45% say not priced at all. Overall, stocks are seen as overpriced by 59% of respondents. That's up from 53% in the March survey. 10% say they're overpriced compared to 3% and correctly priced, well, just 17%. A little change from the last time. Not a lot of value seen out there with just 10% saying that stocks are underpriced. Hugh Johnson of Hugh Johnson Economics writes in with the survey, quote, although equity prices are undervalued, in his opinion, the level of the stock market optimism remains too high. Most likely there are further declines ahead. The recession probability rising to 53%. That's up from 22% back in January. It's the biggest two-survey move we've seen since the Fed hike rates in 2022. So, one way to think about it is the tariffs are viewed now as a similar kind of economic shock as those sharp rate hikes. The S&P outlook looking to be unchanged about from current levels ending the year at 56.29, but not a bad jump seen for next year to 62.61. That's about 10%. Thomas Simons from Jefferies, he writes in, By the second half of 2026, we expect that the tax deregulation policies pursued by the administration will return the economy to a better trajectory of growth. Well, faced with higher inflation and slower growth, the expectation is the Fed will cut rates later this year, but respondents are divided on whether that first cut comes in June or July. So, guys, not a lot of preemption expected from the Fed, but they are expected to respond more to weakness than to inflation. Interesting. Meantime, Besson's in front of the House today, Steve, says there's no signs of recession right now. He expects Q1 to get revised higher. No talks with China at the moment. And then he's asked who pays tariffs, said it's a complicated mix of factors. Well, I mean, that is ultimately true. We'll have to watch how much of each of all these prices end up at the consumer level. There's expectations that people will try to pass on as much of the price hikes as they can. Whether or not they're successful, that will depend on a whole bunch of things. China may eat some, importers may eat some, and the wholesalers as well. And ultimately, some of it filters down to the consumer, sometimes all of it. Most of the surveys show that companies want to pass as much down as they possibly can. As for the recession, well, it's not quite 100 percent. It's 53 percent. And you'll note from that chart, they thought there was a 63 percent probability in 2022. That didn't come to pass either. So I guess there's still some possibility that better policies or policies that aren't quite as destabilizing to the economy could ultimately keep the train from going off of the cliff here. Carl? Yeah, we're used to some false flags. I'm thinking LEI last couple of years. Steve Leesman joining us on the Fed survey.

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