BENGALURU- The blistering rally in global stocks is nearly over, any further gains will be limited and a correction is likely by the end of the year, a Reuters poll of analysts found.
Global stocks have recovered by more than 90 percent from the troughs hit during the first wave of the COVID-19 pandemic, according to the MSCI world equity index that tracks shares in 50 countries.
But the rally is struggling to maintain its pace.
The spread of the Delta variant of the coronavirus and the US Federal Reserve’s pending plans to taper its asset purchases are likely to leave equity markets exposed to turbulence over the coming months.
“The positive earnings season catalyst now behind us means some of the macro negativity is spilling over into equities,” Emmanuel Cau, head of European equity strategy at Barclays in London, said.
“Medium-term though, resilient economic/earnings growth and excess liquidity are likely to remain the dominant market drivers, in our opinion. This should continue to feed the ‘buy the dip’ mentality, although investors may stay on a wait and see mode for now, given the lack of meaningful correction in the past 12 months.”
Last week, world stocks suffered their biggest fall since June but have recovered from nearly all of those losses.
Still, nearly two-thirds of analysts who answered an additional question – 66 of 107 – said a correction in global equity markets by end-year was likely. The remaining 41 said unlikely.
“The fundamental situation is still very supportive even if markets have rejoiced and risen with vigour. Nevertheless the strongest economic momentum is peaking, which leads to a somewhat more uncertain terrain,” Tomas Hildebrandt, senior portfolio manager at Evli Bank in Helsinki, said.
“Will the levelling growth be enough for markets?” he asked.
Nearly all of the 17 indices polled were forecast to retain the double-digit gains made so far this year, according to the median views of over 250 equity analysts taken Aug 11-24.
