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Credit Suisse: Global stock run has another 6% to go

  • Credit Suisse strategist Andrew Garthwaite sees global equities adding another 6 percent by mid-2018 thanks to a strong macro backdrop.
  • "We have the most broad-based upturn in global growth since 2010 and macro breadth and earnings revisions are closely correlated," wrote Garthwaite in Monday's note.
  • The S&P 500 has added 16 percent since January while the Dow continued to notch all-time highs Tuesday.
  • Meanwhile in Europe, the German DAX index is up nearly 15 percent this year and the British FTSE 100 has climbed more than 10 percent.
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The global stock rally has even more room to run, according to Credit Suisse's top equity analysts.

Global shares should see a healthy 6 percent surge until the middle of next year as a solid macro backdrop and earnings fuel the current wave of "rational exuberance," according to Andrew Garthwaite, global equity strategist at Credit Suisse.

"We have the most broad-based upturn in global growth since 2010 and macro breadth and earnings revisions are closely correlated," wrote Garthwaite in Monday's note. "There are clear signs of investment-led growth, and we show this is typically good for both markets and earnings."

In the U.S. alone, the S&P 500 has added 16 percent since January while the Dow continued to notch all-time highs Tuesday morning. Meanwhile in Europe, the German DAX index is up nearly 15 percent this year and the British FTSE 100 has climbed more than 10 percent. Economists have dubbed the widespread success a synchronized global recovery.

"In Europe, despite the appreciation of the euro, PMI new orders have not rolled over, and remain consistent with nearly 3 percent GDP growth," added Garthwaite. "The proportion of countries that are experiencing PMI new orders in excess of 52 is now the highest since the immediate recovery from the global financial crisis."

Even central bank policy seems to be positive for equities for now. Despite announcing the rollback of its extensive portfolio this fall, the Federal Reserve's efforts will likely not have much impact until late 2018, according to the report.

In September, the U.S. central bank announced it will begin to roll off its $4.5 trillion balance sheet. The majority of the assets are comprised of federal bonds and mortgage-backed securities it acquired under a program known as quantitative easing.

But Garthwaite says some investors "exaggerate" the importance of the Fed's actions in the near term. Credit Suisse analysts estimate that the Fed's balance sheet is likely to be only $360 billion smaller by the end of 2018.

The overall rise in exuberance does have some Wall Street analysts cautious that the bull market may be nearing an untimely pullback. While Credit Suisse does see gains for global stocks in the near term, even Garthwaite said he believes the bull market is in its "late stages."

"In our view, we are in the late stages of the equity bull market. Equities are 39 percent above their previous peak in real terms, which is similar to the average post-war bull market," he cautioned.