By Rahul Karunakar
BENGALURU (Reuters) - The celebratory mood has dampened among even the most bullish equity market analysts polled by Reuters, who now expect global stocks to recover most of this year's losses but close out 2018 below the peaks hit in January.
World stocks have been whipsawed since early February by several broad-based sell-offs led by trade war fears, rising interest rates, the turbulent U.S.-North Korea relationship, and a spiralling Italian political crisis.
The S&P 500 has dropped from its record high in January and volatility has picked up dramatically, leaving many investors worried a near decade-long bull run was ending.
"After nine years of markets outperforming the real economy, we think the opposite now applies as policy tightens," noted Andrew Sheets, chief cross-asset strategist at Morgan Stanley.
"We think that this bull market has limited runway which has not been extended by tax changes, technology or other factors. We think it is in the midst of a topping process, following a 'normal' historical pattern where credit peaks first, yields peak second and equities peak last."
Still, the May 15-31 Reuters poll of over 300 equity strategists, analysts and fund managers from around the world showed all 17 stock indexes polled were expected to climb from here and close out the year with gains.
That despite 11 of those indexes still in the red so far this year and well below where they were predicted to be by mid- year in the previous poll in February.
The latest consensus, though, was a downgrade to forecasts made just three months ago for 13 of the 17 indexes polled and the range of forecasts across most major stock markets showed optimism was dented with lower highs.
Still, about 58 percent - 84 of 145 - strategists who answered an additional question were confident or very confident world stocks will continue rising over the next 12 months. The rest said they were not confident or not at all confident.
"Global equity indices very likely are in a top-building process where selective highs are possible but where further upside potential has become rather limited," said Gerhard Schwarz, head of equity strategy at Baader Helvea.
Top global fund managers recommended a cut to equity allocations to a nine-month low in May after a turbulent month, according to a separate Reuters survey on Thursday.
Still, in the latest poll, U.S. and European stocks were expected to find firmer footing and recover in the second half of the year on expectations those economies overcome the current slowdown and corporate earnings there continue to rise.