Global equity rally expected to moderate next year, correction likely | Breaking News Updates

Global equity rally expected to moderate next year, correction likely

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Global stocks will shake off recent weakness and rise over the next 12 months, but at a more moderate pace than this year’s rally, a Reuters poll of stock analysts found which also said a correction was likely over the next six months.

Uncertainty surrounding the virulence of the Omicron coronavirus variant and its ability to evade vaccine protection led to a rare sell-off in financial markets last Friday.

But some analysts believe the flight to safe assets and heightened volatility suggest markets may experience more chaos in the near term.

Indeed, when asked if a correction in their local stock market was likely, about three-quarters of those polled – 79 out of 106 – in a global poll covering major indices from more than a dozen countries responded. Yes.

Remarks by Federal Reserve Chairman Jerome Powell on Tuesday that the US central bank would discuss whether to accelerate the unwinding of its asset purchase program did not help risk assets.

“Looking ahead, we continue to see a market rally, albeit more subdued, with better than expected earnings growth with easing supply shocks,” said Dubravko Lakos-Bujas, chief equity strategist. Americans and Global Head of Quantitative Research at JPMorgan Securities.

“The main risk to our outlook is a change in central bank policy, especially if the post-pandemic upheavals persist.”

The larger poll of more than 150 stock analysts around the world conducted from November 15 to December 1 showed that most indices are rebounding from the current downtrend and will reach new highs by the end of 2022.

Of the 17 major indices surveyed, 10 are expected to exceed their lifetime highs over the next 12 months, with five reaching this milestone as early as mid-2022.

Driven by earnings and economic growth, the benchmark S&P 500 will extend this year’s rally and gain 7.5% by the end of 2022 to finish at 4,910.

The pan-European STOXX 600 is expected to rise 7% and reach 500 points by July, 10 points above its peak lifespan reached on November 17.

India’s Sensex BSE was expected to weaken in the near term, but recoup its current losses and peak at 63,000 by the end of next year.

Despite climbing to new highs, the majority of the 17 global indices surveyed are unlikely to repeat or exceed this year’s strong performance next year.

Supported by a strong business outlook, the average Japan Nikkei stock index is expected to reach 31,000 by June 2022, a gain of around 11% from Tuesday’s close.

When asked to give their outlook on how companies will profit in their local markets over the next six months, more than 85% of strategists polled, 79 out of 91, said they expected profits to improve.

“We expect earnings to be the primary driver of global equity returns in 2022. In line with our earnings expectations, we expect high single-digit equity returns in 2022 compared to double-digit returns in 2021,” said Philipp Lisibach, Global Strategy Director at Credit Suisse.

“Other favorable winds for this asset class going forward include the ongoing economic recovery and the ‘there is no alternative’ (TINA) argument for equities.”

Global equity rally expected to moderate next year, correction likely

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