Unlike previous episodes, in which investors saw corrections as opportunities to buy stocks at bargain prices, the current downward trend is expected to be more persistent, highlighting the deteriorating outlook for risk assets.
This change of opinion is largely due to the fact that the actions no longer have the backing of central banks, that they are closing the taps of liquidity and now focus more on fighting inflation at multi-decade highs, raising interest rates, in many cases aggressively.
Analysts forecast a dull year for equities in the previous survey, conducted just days before the Russian invasion of Ukraine on February 24, but the war threw stocks into turmoil and the US S&P 500 index nearly entered an official bear market last week.
Surveys conducted by Reuters between May 12 and 24, covering 17 major indices, showed that most major exchanges will struggle to recoup current year losses by the end of 2022. It is expected that almost all end the year below their all-time highs and remain below them in mid-2023.
“Global equities are in the midst of a bear market that is not over yet. Macro and earnings data continue to soften as global economies move into later phases of the cycle. profits are slowing globally”noted Michael Wilson of Morgan Stanley.
More than three quarters of the analysts -79 out of 104- who responded to a separate question said that the current slowdown would last at least another three months.
While 48 indicated that from three to six months, 21 stated that from six to nine months, six said that from nine to 12 months and four that more than one year. The remaining 25 chose less than three months.
Underscoring that negative outlook, end-2022 medians for 16 of 17 surveyed indices were downgraded from February polls. Only Mexico’s CIP index outlook was improved and by a small amount.
The wider range of forecasts for the end of 2022 compared to the February survey, despite being three months closer, shows a greater degree of uncertainty about what is to come.
Almost 60% of analysts – 61 out of 104 – who responded to an additional question expect volatility, which is off its highs for the year, to increase in their local markets in the next three months. The remaining 43 said they will decline.
“As growth slows and inflation remains stable, markets will show more volatility,” said Sameer Samana of the Wells Fargo Investment Institute.
Although Wall Street strategists expect the S&P 500 to end 2022 above current levels and gain more than 10%, it is thought that it will not recover all its losses, which amount to almost 17% in the year.
Even the volatile stock index is expected to Sao Paulo’s Bovespa, which has climbed just over 5% this year, rose less than expected, as nervousness over national elections and double-digit interest rates prompted a shift to deposit accounts.
European stocks, which have sunk more than 10% so far this year, to their worst start to the year since the COVID-19 outbreak in 2020 and their second-worst start since 2008, are also not expected to make significant gains. .
Source: Ambito
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