Global Stock Rally Predicted to Surge Again

Expected 6% surge by analysts

Global stocks are expected to get 6% surge by analysts


The global stock is expected to have even more room to grow as it adds another 6 percent due to a strong macro backdrop by mid-2018, according to Credit Suisse’s top equity analysts.

The S&P 500 has added 16 percent since January while the Dow’s reach for all-time highs continued Tuesday morning in the U.S. alone. Meanwhile in Europe, the index for the German DAX increased nearly 15 percent this year and the British FTSE 100 edged up to more than 10 percent. Economists identified the wide ranged success a synchronized global recovery.

“In Europe, despite the appreciation of the euro, PMI new orders have not rolled over, and remain consistent with nearly 3 percent GDP growth,” stated Andrew Garthwaite, global equity strategist at Credit Suisse.

“The proportion of countries that are experiencing PMI new orders in excess of 52 is now the highest since the immediate recovery from the global financial crisis,” he added.

The healthy surge that the global shares will experience would also be due to earnings fueling the current wave of “rational exuberance.”

In Monday’s note, Garthwaite wrote that they have the most broad-based improvement in global growth since 2010, wherein macro breadth and earnings revisions are closely linked. There are also signs of growth driven by investment which is typically a good signal for both earnings and markets.

Despite the announcement of a rollback regarding its extensive portfolio this fall, the Federal Reserve’s efforts wouldn’t have much impact until late 2018, while the central bank policy seems to be in good light for equities currently.

Caution for the Bull Market

Analysts cautioned about Bull Market

The U.S. central bank announced in September the beginning of its $4.5 trillion balance sheet roll off. Investors seem to “exaggerate” the importance of the Fed’s moves in the near term, according to Garthwaite.

Wall Street analysts are cautious about the bull market due to the overall rise in exuberance, thinking that there will be a nearing ultimate pullback. Although the Credit Suisse does see that global stocks will show gains in the near term.

“In our view, we are in the late stages of the equity bull market. Equities are 39 percent above their previous peak in real terms, which is similar to the average post-war bull market,” he warned.

Analysts estimate that the Fed’s balance sheet is likely to be smaller by the end of 2018 by about $360 billion.

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