Stocks to rise? 85 percent say yes – as ever
Even a government shutdown and the prospect of an unprecedented U.S. government default – no matter how small – couldn’t shake the conviction among equity analysts that stock markets only have further to rise.
Published on Tuesday, the latest Reuters poll collected more than 450 points of data from hundreds of analysts worldwide on how 20 of the world’s biggest stock markets will perform from now until the end of the year.
Some 85 percent of forecasts predicted a positive return for stock markets between now and end-December. Thursday brought firming hopes of a deal to ensure the U.S. does not default on its debt, and global shares have lifted for a second day on Friday. That strong consensus could well prove correct.
Looking further out, optimism increases. 87 percent of forecasts for stock markets’ performance between now and mid-2014 were positive.
For the end of next year, 91 percent of responses showed stock indexes hitting higher levels than Wednesday’s.
The only way is up, seemingly. Global stocks have risen more than 125 percent since their March 2009 nadir, although not in particularly steady fashion (2011 was a bit of a disaster).
But as in the past, forecasts from the latest quarterly Reuters Poll of stock market strategists from around the world ought to be taken with a dose of common sense.
Markets have been prone to nasty bouts of turbulence from political crises in the U.S. and euro zone, but they’ve largely managed to sidestep the worst case scenarios so far (U.S. debt default, outright collapse of the Italian government). Next year might bring worse luck.
A little historical perspective is also necessary.
Share prices had already started to fall by the time the June 2008 stock markets poll was conducted, a few months before the collapse of Lehman Brothers.
Still, 82 percent of the forecasts in the poll pointed to a recovery in the months ahead, rather than a crash. In fact, 22 out of 26 analysts who answered an extra question then thought the worst had passed for stock markets.
And it was a similar story in the June 2011 poll, when respondents were supremely confident the market would bounce back, instead of being dragged down by the escalating euro zone crisis.
So what is the use of these polls if the consensus is so often wrong?
A small minority did call it right, both in 2008 and 2011. Like everything else about the economy and financial markets over the last few years, the real story lies around the margins of mainstream thinking.
Check out the poll results in an interactive graphic