Global stocks to recover but remain below their lifetime highs, analysts say

Traders work on the floor of the NYSE in New York.

BENGALURU Reuters Global stocks are expected to recover from current levels but remain well below the record highs this year and next as a majority of more than 150 equity analysts polled by Reuters predicted a rebound that is both lackingluster and uneven.

Unlike previous episodes where investors saw corrections as opportunities to pick up stocks at a bargain, the current downtrend was expected to be more persistent, underscoring the deteriorating outlook for risk assets.

That shift in view was due to stocks no longer having a backstop from central bankers, who are turning off the liquidity taps and are now focused on fighting decades-high inflation by hiking interest rates, in many cases aggressively.

The war threw stocks into disarray, with the U.S. Standard Poor's 500 nearly in an official bear market last week, while analysts predicted a dull year for equities in the previous poll, taken only days before Russia's Feb. 24 invasion of Ukraine.

The May 12 -- 24 Reuters polls covering 17 major indices showed most major bourses struggling to recover year-to-date losses by the end of 2022. Almost all were expected to end the year below their lifetime highs and remain below them by mid- 2023.

Global equities are in the midst of a bear market that is not yet finished. Macro and earnings data points are beginning to soften as global economies move towards later cycle phases. The earnings revisions are slowing globally, according to Michael Wilson, chief U.S. equity strategist and chief investment officer at Morgan Stanley.

More than three-quarters of analysts, 79 of 104, who answered a separate question, said the current downturn would last at least another three months.

While 48 said three to six months, 21 said six to nine months, six said nine to 12 months, and four said over a year. The remaining 25 chose less than three months.

The end- 2022 medians for 16 of 17 indices polled were downgraded from the February polls, underscoring that negative outlook.

The outlook for Mexico's IPC index was upgraded by a slight amount.

There is a greater uncertainty about what lies ahead, despite the wider range of forecasts for end- 2022 compared to the February poll, which was three months closer to being three months closer.

Nearly 60% of analysts, 61 of 104, who answered an additional question expected volatility, which is off its highs for the year, expect to increase in their local markets over the next three months. The remaining 43 said it would decrease.

As growth slows and inflation remains sticky, markets will exhibit more volatility, said Sameer Samana, senior market strategist at Wells Fargo Investment Institute.

82 respondents said growth stocks would outperform growth stocks for the rest of the year, while 23 said growth stocks would outperform.