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By Hari Kishan

BENGALURU (Reuters) – Global stocks will shake off recent weakness and rise over the next 12 months but at a more tempered pace than this year’s rally, found a Reuters poll of equity analysts who also said a correction was likely in the next six months.

Uncertainty around the virulence of the Omicron coronavirus variant and its ability to evade vaccine protection led to a rare sell-off in financial markets last Friday.

But some analysts reckon that flight to safe assets and heightened volatility suggests markets may be in for a bumpier ride in the short run.

Indeed, when asked if a correction in their local equity market was likely, about three-quarters of respondents – 79 of 106 – in a global poll covering major indexes from over a dozen countries said Yes.

Federal Reserve Chair Jerome Powell’s remarks on Tuesday that the U.S. central bank would discuss whether to accelerate the unwinding of its asset purchases programme didn’t help risk assets.

“Looking ahead, we continue to see market upside, though more moderate, on better-than-expected earnings growth with supply shocks easing,” said Dubravko Lakos-Bujas, chief U.S. equity strategist and global head of quantitative research at JPMorgan (NYSE:JPM) Securities.

“The key risk to our outlook is a hawkish shift in central bank policy, especially if post-pandemic dislocations persist.”

The broader poll of over 150 equity analysts around the world taken Nov. 15 to Dec. 1 showed most indexes bouncing back from the current downtrend and touching new highs by end-2022.

Of the 17 major indexes polled on, 10 were expected to surpass their lifetime highs over the next 12 months, with five reaching that milestone as early as mid-2022.

Driven by earnings and economic growth, the benchmark S&P 500 index will extend this year’s rally and gain 7.5% between now and end-2022 to finish at 4,910.

The pan-European STOXX 600 is forecast to rise 7% and reach 500 points by July, 10 points above its lifetime peak hit on Nov. 17.

India’s BSE Sensex was expected to falter in the near-term but recoup its current loses and hit a high of 63,000 by the end of next year.

Despite scaling new peaks, the majority of the 17 global indices polled on were forecast to neither repeat nor surpass this year’s strong performance next year.

Underpinned by a solid corporate outlook, Japan’s Nikkei share average index was expected to reach 31,000 by June 2022, around an 11% gain from Tuesday’s close.

When asked to give their outlook on corporate earnings in their local markets over the coming six months, over 85% of strategists polled, 79 of 91, said they expected earnings to improve.

“We expect earnings to be the key driver of global equity returns in 2022. In line with our earnings expectations, we expect high single-​digit equity returns in 2022 compared to double-​digit returns in 2021,” said Philipp Lisibach, chief global strategist at Credit Suisse (SIX:CSGN).

“Other tailwinds for this asset class going forward include the ongoing economic recovery, and the ‘there is no alternative’ (TINA) argument for equities.”

Reuters poll graphic on global stock market forecasts https://fingfx.thomsonreuters.com/gfx/polling/gdpzymrzovw/Global%20stocks.png