Clear signs the global economy is cooling prompted analysts to trim their outlook for most of the world's major stock markets compared with three months ago, according to a Reuters poll that still pointed to meaty gains from here.
Thursday's quarterly survey of 350 equity strategists from all over the world showed only the U.S., Taiwanese and Russian stock markets escaping downgrades, with Moscow again expected to lead the way with double-digit gains.
While the latest poll lacked the sheer exuberance seen in the March survey, perpetually optimistic equity bulls were again out in force.
They shrugged off the fact that 11 out of the 17 markets covered by the poll are so far deep in the red for 2011, and instead projected strong gains from here for every one of them.
In comparison with oil and commodity markets that have proved hugely volatile this year, and with the fiscal crisis in Greece wreaking havoc on currency and government bond markets, some respondents pointed to stocks as the best alternative.
"Equities still look attractive when compared to other global asset classes," said Angus Campbell, head of sales at London Capital Group.
The search for yield has become difficult for investors. High inflation has eroded cash assets, safe government bond yields are at rock-bottom and gold's heady ascent to record levels leaves it looking expensive to many.
Still, the extent of the slowdown in Western economies is unclear and there has been no solution yet to the Greek sovereign debt crisis. Both could yet tame the bulls and bring out the bears.
European politicians are scrambling to avert a Greek sovereign debt default in mid-July, which if realised has the potential to hurl the financial system in Europe and elsewhere back into systemic chaos.
AMERICAN STOCKS ARISE
The world's biggest stock index by market capitalisation -- the Dow Jones Industrial Average -- was the only bourse based in an advanced economy to be upgraded compared with March's poll.
Despite dismal labour market data and growing signs the U.S. economy is cooling fast, analysts were very upbeat about the prospects for the Dow and S&P, which have each gained around 90 percent since their nadir during the Great Recession.
There seemed to be little concern among equity bulls about the imminent end of the Federal Reserve's quantitative easing (QE) programme that coincided with a sharp rise in asset prices. The poll was conducted before the Fed cut its U.S. growth forecasts on Wednesday, with no hint of any further QE in the pipeline.
"We are still double from where we were two years ago; I think the market is doing great. We are in slowdown and correction but that's following a 30 percent gain from the August lows," said Bob Doll, chief equity strategist at BlackRock in New York.
Economists polled by Reuters last week were less sure of the outlook than equity analysts. They slashed their outlook for major Western economies in the June 15 poll, reacting to a raft of dire jobs and industrial production figures.
Strategists saw the Dow rising 7.4 percent from its Wednesday close of 12,109.7 to 13,000 by the end of the year -- up from 12,700 seen in March -- and then to 13,700 by around this time next year.
Similarly, the S&P is seen soaring nearly 9 percent to 1,400 by end-2011, from Wednesday's 1,287.1.
The poll once again pointed to stellar returns on Russian shares. Having already rocketed almost 300 percent since the global recession, the Russian RTS looks set to gain another 17 percent from now until the end of the year thanks to a resurgent economy still revelling in strong oil prices .
"This year, the domestic story will be at the forefront. Consumer financials and telecoms will be the drivers for the index," said Peter Westin, economist at Moscow-based Aton bank.
Asian stocks have largely endured a torrid time in 2011, with most indexes stuck in the red, since surging inflation in India and China and the subsequent tightening of interest rate policy has rocked share markets in emerging Asia.
But with double-digit gains expected for indexes in Hong Kong, China and India from now until this time next year, the poll suggested Asian shares might have bottomed already.
Japan's Nikkei, 6 percent in the red this year after the March 11 devastating earthquake and tsunami, should likewise start racking up gains soon of over 9 percent between now and the year-end.
"We may see a lull until this summer. But the overall market may rise on expectations for a sharp recovery in corporate earnings after that," said Fumiyuki Takahashi, managing director of equity research at Barclays Capital.
© 2014 Thomson/Reuters. All rights reserved.