Global stocks outlook dims with risk aversion on the rise again: Reuters poll

Tue Jul 12, 2016 9:19am EDT
 
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By Ross Finley and Rahul Karunakar

LONDON/BENGALURU (Reuters) - Optimism about stock market performance this year has wilted, with investors fretting about the global economy and unexpected shocks likely to condemn most key indices to a weaker performance than thought just a few months ago.

The latest Reuters poll of over 250 analysts, fund managers and brokers worldwide taken June 27-July 11 also showed an intensifying pull between stretched share prices - with Wall Street at a record high - and bond markets, with most government bond yields at record lows and vast swathes of them negative.

Strategists at Citi have noted that the gap between the global government bond benchmark yield, just 0.5 percent, and the dividend yield on global equities of about 2.7 percent, is the widest in 60 years, and on that basis, stocks look attractive.

Ten of the indexes polled are expected to be lower by the end of the year when just three months ago the consensus view among forecasters was that they would be up, in some cases significantly. [Graphic: tmsnrt.rs/29t4c95]

But the poll results do not provide a definitive picture on where forecasters are recommending investors put their money, although hopes remain high once again that next year will be better, particularly for struggling emerging markets.

The Bank of England is set to reverse course in response to Britain's shock vote on June 23 to leave the European Union, with rate cuts and renewed government bond purchases nearly certain in an attempt to limit the damage. [BOE/INT]

The trouble is, even though the vast majority polled don't expect any financial crisis from Brexit, that shock has increased risk aversion, as well as the risk a likely British recession may have ripple effects well beyond its borders.

Expectations for an interest rate rise in the United States have also faded despite a surprisingly strong jobs report last week, triggering a rally in stocks and U.S. Treasuries.   Continued...

 
A man passes by the New York Stock Exchange (NYSE) in New York City, U.S., July 11, 2016.  REUTERS/Brendan McDermid