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The blistering rally in global stock markets is set to continue for at least six months, albeit at a shallower pace, amid hopes more cheap cash and a COVID-19 vaccine allow economies to heal and corporate earnings to recover, a Reuters poll found.

With the coronavirus pandemic sweeping across the globe, economic activity ground to a halt as governments forced citizens to stay home and businesses to close, disrupting supply chains.

That collapse led to unprecedented levels of fiscal and monetary stimulus and with that cheap money supply set to continue, around 75% of respondents to an additional question said the bull run would last at least six months.

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Over half of those respondents in the Nov. 12-24 poll said at least a year.

“The rebound in equities from March to October was the initial ‘hope’-driven phase of a new bull market, led mainly by valuation expansion as profits collapsed, while we are now moving into the longer ‘growth’ phase as profits start to recover,” noted analysts at Goldman Sachs.

“Negative real interest rates should continue to support the bull market in 2021.”

While around 1.4 million people have died globally from COVID-19 and the Northern hemisphere is experiencing a second wave, expectations were pinned on effective vaccine developments, and around 80% of respondents said their forecasts were based on the progress.

The tough lockdowns imposed by governments put a big dent in company profits but hopes a vaccine will allow some return to normality led around two-thirds of respondents to say corporate earnings would return to pre-COVID-19 levels within a year.

So while nine of the 17 indexes Reuters polled around 170 strategists on were expected to end this year down from 2019 closes, most were predicted to end 2021 above pre-pandemic levels - with some significantly higher.

The range of forecasts suggests a higher proportion of strategists expect the indexes polled to rise from here by mid and end-2021.

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“Equities are set to rise further. They increased already appreciably since March notwithstanding the second wave of new COVID-10 cases thanks to huge policy support, both fiscal and monetary,” said Michele Morganti at Generali Investments.

RUN ON

The S&P 500 has staged a 60% recovery roughly from March lows and will rise over 9% between now and the end of 2021, finishing next year at 3,900.

U.S. stocks were nervous ahead of the presidential election this month but investors were upbeat about Democrat Joe Biden’s win, a feeling likely to linger if a divided Congress means limited regulatory changes and Biden’s Cabinet picks are market-friendly.

North of the border, Canada’s main stock index is also set to extend its rally over the coming year, as the likely vaccine rollouts bolster prospects for the economically-sensitive financial and resource stocks that dominate the index.

European stocks were forecast to flirt near record highs next year, driven by expectations of a strong bounce in corporate confidence and profitability as the European Central Bank looks set to keep stimulus flowing.

What has also helped stocks outside of the U.S. is the fading of the dollar’s dominance this year.

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“We forecast strong returns across all equity markets, and the prospect of a weaker U.S. dollar and fading global risks points to a narrowing of the performance gap relative to the U.S. and a recovery in laggard regions like Europe and EM (emerging markets),” added Goldman Sachs’ analysts.

India’s stock market rally will continue and hit new record highs in 2021, as equity strategists overwhelmingly expected corporate earnings to return roughly to pre-pandemic levels within a year.

Brazilian stocks will make a run of gains to reach pre-pandemic levels by the middle of next year and Mexico’s by end-2021, but caution remains as a second wave of coronavirus cases hits the northern hemisphere.

“Rising COVID-19 cases are a risk, but keep the faith. 2020 witnessed once-in-a-century swings in the economy, policy and markets. 2021 will bring more normality,” noted Andrew Sheets, strategist at Morgan Stanley.

“This feels odd to write, as the global pandemic rages and many lives remain disrupted. But we think that it will be true. The year ahead should see economic growth recover, control of the virus improve and uncertainty decline.”

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