Stocks will post a further 10 percent rally in 2012, extending advances made so far this year, as profits grow and the European debt crisis stabilises, according to JPMorgan Asset Management.
The biggest gains will be in emerging-market equities where earnings expansion will be larger, according to Dan Morris, a global strategist at JPMorgan, which has $1.3 trillion in client assets. The MSCI World Index of global shares rose 7.4 percent this year through Feb. 10 as prospects for an improving U.S. economy added more than $4.2 trillion to global equity prices.
“If risk aversion continues to fall as the situation in Europe stabilises, equity prices should be driven less by swings in sentiment and more by the outlook for company profits,” Morris wrote in a report today.
“With earning-per-share gains of around 8 percent, a dividend yield of nearly 3 percent, and the potential for better valuations, we believe that equity markets may yet return another 10 percent this year even after the rebound we have already seen.”