By Rahul Karunakar and Hari Kishan
(Reuters) - The rout in global stock markets earlier this year has dented optimism among even the most bullish of equity market analysts polled by Reuters, who now reckon only half of around 20 major stock markets will gain in the year
When interviewed at the end of the first quarter on their views, many strategists had little to say about broad trends. Instead they were fixated on what the U.S. Federal Reserve will do with interest rates, cited by a majority as the biggest risk to their outlooks.
The March 17-31 Reuters poll of over 250 equity strategists, analysts and fund managers from around the world is the latest in a series of surveys over the past year in which respondents markedly lowered forecasts.
Only half of the around 20 major stock indices surveyed were forecast to trade higher at the end of this year from where they started it. Just three months ago, analysts had predicted all would rise.
"We've come a long way back from the depths of despair six or seven weeks ago. We think between now and the end of the year the market grinds higher, but it's not going to be without an uptick in volatility," said Leo Grohowski, chief investment officer of BNY Mellon Wealth Management in New York.
Since last August, financial markets have been on a roller-coaster ride. China devalued its currency, sending shockwaves through foreign exchange markets, fanning already-smouldering global growth concerns that have not gone away.
Fed Chair Janet Yellen just recently cited those concerns as a reason for the central bank's downgrade to expecting two not four rate hikes this year.
Tumbling commodity prices and lingering concerns about scant consumer inflation after so much global monetary stimulus have also kept many investors on the defensive, and for a while in January and February, in full-blown market panic.
March turned out to be a sweet spot for stock markets as many regained composure, partly on a rebound in crude oil prices as well as an unexpectedly large pile of new monetary stimulus from the European Central Bank.
But major sovereign bond yields fell during the first quarter of this year.
FUNDS ALSO DEFENSIVE
The fact so few expect a sudden rebound in those rock-bottom yields shows investors aren't yet convinced that global reflation and an acceleration in growth is at hand, leaving prospects for stock markets very uncertain.
Top global fund managers recommended a cut to equity allocations in their model portfolio to the lowest in at least five years, according to a separate Reuters survey of asset managers from around the world published this week. [WRAP/ASSET]