Global stock markets will at best only recoup losses in 2019 from the sell-off late in 2018, according to analysts polled by Reuters, who reckon the risk is skewed more toward a decline in mid-year.
Optimism among equity strategists has diminished after the 2018 rout, which left it the worst year for most markets since the global financial crisis.
Ater the worst annual performance since 2015 and the worst December since the Great Depression, the S&P 500 in the US gained nearly 8% in January, its best start in over 32 years.
The polls of over 200 equity strategists, analysts and fund managers from around the world is the latest in a series of surveys over the past year in which respondents markedly lowered their forecasts for global stocks.
That view is driven by threats ranging from the US-China trade war to slowing global growth and tightening liquidity. “There are significant risks to the outlook for 2019,” noted David Kelly, chief global strategist at JP Morgan Asset Management.
“2018 has been a difficult year for investors as long bull markets… have encountered strong headwinds, and international stocks have underperformed following a very strong 2017.
“Shifting fundamentals in an aging expansion have certainly played their part in slowing investment returns,” he said.
About 65% of more than 90 respondents who answered an additional question said the risk for global stocks by mid-year was for a sharp fall. The remaining said the opposite. That echoes findings from a separate Reuters poll of global fund managers, which showed a cut to recommendations for equity allocations to the lowest since March 2017.
“Risks for global stocks are skewed to a sharp fall as a global economic slowdown gathers pace, the current business cycle is fairly old and global central banks have limited firepower to support weakening economies,” said Vyacheslav Smolyaninov, chief equity strategist at BCS Global Markets. Nine of 16 indexes were forecast to trade higher by the end of 2019, but analysts had predicted just three months ago that all but one of them would rise.
Forecasts were raised for only three of the 16 from the previous poll.