As the global financial and business elite gather in Davos, Switzerland, for their annual forum, 53% of respondents to the Bloomberg Global Poll also say equities will offer the highest return in the next year. That’s a 17 percentage point jump from the last poll in November and the most since the quarterly survey of investors, analysts and traders who subscribe to Bloomberg began in July 2009.
With 73% of corporate earnings exceeding analysts’ estimates, it may be difficult for U.S. stocks not to reach a record in 2013.
The S&P 500 is about 5% below the all-time high in October 2007. Profits in the benchmark gauge are forecast to exceed $1 trillion this year, or 31% more than when the gauge peaked, according to more than 11,000 analyst estimates compiled by Bloomberg. Even if the price-earnings ratio, now 9.8% below the six-decade mean, doesn’t expand, the S&P 500 is poised to recover fully from the financial crisis that began almost six years ago.
“Corporate America has done an incredible job post-recession,” Leo Grohowski, BNY Mellon Wealth Management’s New York-based chief investment officer said in a Jan. 16 phone interview. His firm oversees $179 billion. “It’s not going to be a return to the ’80s and ’90s where we had people retiring from their day jobs to become day traders. I wouldn’t revert to the historic P/E ratio kind of environment. But the good news is I don’t think we need that to reach a record.”