Global stocks fatigued from bull run, but no correction expected

BENGALURU – The global equity bull run is showing signs of fatigue, with most major stock indexes not expected to repeat last year’s stellar performance, according to a Reuters poll of stock analysts who also said a near-term correction was unlikely.

With financial markets paring back 2024 rate cut expectations from major central banks and most stock indexes already trading close to lifetime highs, further gains were expected to come at a much slower pace.

A resilient global economy, an ongoing boom in technology stocks and their considerable weight in equity indexes, especially in the US, are likely to prevent any major drop in stock prices in the near-term, the poll forecast.

A strong 60% majority of analysts, 51 of 85, who answered an additional question in the May 13-22 poll said a correction of 10% or more over the coming three months was unlikely (41) or highly unlikely (10). The remaining said likely (23) or highly likely (11).

“The significant gains seen in many stock markets over the last few months have made our portfolio managers a little more cautious on the outlook…Fading prospects for interest rate cuts, such an important driver of the market rally, also give us further pause for thought,” said Paul Quinsee, head of global equities at JP Morgan Asset Management.

“But fundamentals of corporate profits still look good… Globally, this looks like a much better year for profit growth after a lackluster period post-COVID.”

Indeed, of the 15 stock market indexes surveyed, on only Britain’s FTSE was expected to achieve last year’s performance. In 2023 nearly all of them gained more than 10%.

“Equity return expectations in 2024 should stay muted – 2023’s double-digit market returns will be hard to duplicate,” said Daniel Morgan, senior portfolio manager at Synovus Trust, adding that stocks “are priced for perfection”.

The benchmark S&P 500 index, which sets the tone for global portfolio flows and is one of the best performers this year with a more than 11% gain, is forecast to end 2024 near current levels.

Japan’s NIKKEI index, up more than 15% for the year, was predicted to add another 5% in the second half of 2024. If realised, this would be the second year in a row where the index has outperformed most of its peers.

European and British stocks, which had a good run this year as both Britain and euro zone economies escaped a recession, were either predicted to make little headway or shed a little from here by the end of the year.

The Euro STOXX 50 index, France’s CAC 40 and Spain’s IBEX which are up 11.6%, 7.9% and 12.2% respectively this year, were forecast to gain another 1-2%.

Britain’s FTSE, the European STOXX 600 and Germany’s DAX index were seen falling 1.4%, 1.9% and 0.2%, respectively, between now and year-end.

Despite high valuations, India’s benchmark BSE index was forecast to lead its peers and gain more than 8% for the remainder of the year. The Sensex was already up more than 2% for the year.

(Reporting by Hari Kishan; Additional reporting and polling by correspondents in Bengaluru, Buenos Aires, London, Mexico City, Milan, New York, San Francisco, Sao Paulo, Tokyo, and Toronto; Editing by Ross Finley and Alex Richardson)