Hawkish comments from Federal Reserve officials and a hotter-than-expected August inflation report have weighed on the stock market in recent weeks as investors grapple with the prospect of rate hikes over the longer term even as recession fears grow. The Fed announced a third straight 75 basis point increase on Wednesday, bringing their federal funds rate to the 3%-3.25% range, the highest since early 2008. Projections from the meeting showed that the Fed is expected to raise interest rates. at least 1.25 percentage points in its remaining two meetings this year. Speaking ahead of the Fed meeting, investment veteran Patrick Armstrong believes the Fed is unlikely to continue raising rates indefinitely. “I think the consensus could get the Fed up to 4.25% next March, and then maybe pause. It will be driven by the US economy as well as the inflation outlook. I think. that the US will be on the cusp of a recession throughout early 2023, so I’m unlikely to see the Fed raise prices aggressively once they realize that the US is in a recession or very close to a recession,” he said. Armstrong, chief investment officer at Plurimi Wealth, told CNBC’s “Squawk Box Europe” on Monday. Armstrong is the fund co-manager of Prosper Global Macro, a diversified multi-asset fund with a mission to beat inflation. The fund is up 4.8% through the end of August, outperforming major indexes in both the US and Europe.The S&P 500 and Stoxx 600 are down about 20% and 15% respectively during the same period. What’s in his portfolio Amid stock market uncertainty, he believes the biggest risk is the earnings outlook, which remains “over-optimistic.” “We don’t see any volatility. negative adjustment significantly despite ample evidence of a really poor economic backdrop where consumer spending would actually be hampered. Margins are going to be tight and so will earnings per share,” he said. Against that backdrop, the Prosper Global Macro fund took a number of short positions, as Armstrong bets that the value of those shares is worth the money. This holding will decrease amid market volatility. The largest short-term holding in the fund is a 20% bet on a 10-year Japanese government bond. half of the outstanding bonds. They are desperately trying to cap interest rates at 0.25% as other central banks are aggressively raising prices… at a 40-year low but you’d enter inflation. I just don’t see any realistic scenario where the BOJ could stay at 0% 10 years. So I think it’s an amazingly short time right now,” he said. Armstrong was referring to the Bank of Japan’s yield curve control (YCC) policy – a gender strategy. 10 year JGBs limit at 0% and offer to buy unlimited amount of JGB to protect potential 0.25% limit around target Read more Fund manager says bear market will become ‘annoyed’ – but says he’s not ‘anxious’ Looking for a short-term trade This ETF carries risk – but performs better as volatility spikes Japanese Yen at 24-year low Here’s what to expect at the next BOJ meeting The fund also holds a number of consumer and tech stocks, such as food delivery service DoorDash, Chinese electric vehicle maker Xpeng, British online supermarket Ocado and plant-based meat substitute Beyond Meat Armstrong also saw a “significant decline” in UK commercial property and real estate stocks. retail property in the US, where his funds are British Land and Simon Property respectively. He said it was a “quite toxic environment” for commercial properties in the UK with the economy in a “pretty terrible” position, while the prospect of the Bank of England raising interest rates continued. will weigh on the value of the land. Similar challenges are affecting the US retail landscape, he added, alongside the growing trend of consumers shopping online. – CNBC’s Jeff Cox contributed to the report