The S&P 500 will gain just three percent before the end of the year and will be significantly outperformed by stocks in Japan, Europe and the UK according to Patrick Moonen, a senior Strategist at ING Investment Management.
“The Japan Topix will grow by 17.4 percent between the end of April and December this year, and the European Stoxx 600, FTSE 100 and MSCI EM Free indices will grow by 9.5 percent, 8.6 percent and 9.0 percent respectively during this period," Moonen said.
"We are predicting slower growth of 3.2 percent for the S&P 500 ,” he said in an interview with CNBC on Friday.
“First quarter results have been very promising on both sides of the Atlantic.
In the US, 67 percent of companies beat forecasted earnings and in Europe 68 percent of companies beat them,” he said.
“There is also no widespread evidence of margin pressure although some companies are signaling pressure from rising commodity prices.
We think that by the fourth quarter at the latest, quarterly earnings will surpass the record earnings of the second quarter 2007,” Moonen added.
“Despite a very strong performance since the depths of the financial crisis, equities are still lagging corporate bonds over a 10 year period.” Since companies are favoring more shareholder-friendly measures like buying back equities, increasing dividend payments and doing cash/debt financed acquisitions, Moonen is confident the performance gap will narrow further.
Price earnings ratios in Moonen’s view are implying either above average risk or the absence of any earnings growth.
“With regards to the latter, ING IM says that this is very unlikely in an environment delivering four percent global growth, low inflation and with macro indicators both in the US and Europe still at high levels,” he said.