Global stock markets set for modest gains in 2017: Reuters polls

Tue Oct 4, 2016 12:20pm EDT
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By Rahul Karunakar and Sumanta Dey

(Reuters) - Global equities are forecast to rise modestly in 2017, held back by concerns about the pace of U.S. Federal Reserve interest rate hikes and the waning effect of widespread monetary stimulus that has helped drive shares to lofty heights, Reuters polls show.

While massive stimulus from some of the world's biggest central banks has underpinned a multi-year rally since the financial crisis, taking Wall Street to record highs, doubts over the potency of further monetary easing are growing.

Those concerns have already restrained stock markets this year, with almost half of the 20 indexes surveyed now in the red for 2016, an outcome not predicted by any of the Reuters polls conducted earlier this year.

Expectations in the latest poll of more than 200 equity analysts and fund managers over the past week were for all but one of those indexes to rise between now and the end of next year, but by less than thought three months ago. [Graphic:]

Investors aren't convinced that economic reflation is at hand despite rock-bottom interest rates that have left over $10 trillion in sovereign bonds with negative yields. Expectations for company earnings growth are also continuing to weaken.

A majority of respondents who answered an extra question also said the top risk to global equity markets was that the Fed hikes rates more than expected. Currently markets are pricing in just one rate hike over the coming year but the Fed sees more.

"The key risks to global equities are possible policy missteps or surprises from the Fed," HSBC Asset Management's Global CIO for Equities Bill Maldonado wrote in a note.

"The market continues to price in a fairly dovish U.S. rate hike scenario, so the impact of a policy shock from the Fed will be far-reaching."   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 28, 2016.  REUTERS/Brendan McDermid/File Photo