LONDON This year's rocketing gains for major developed world stock indexes will taper off in 2014, according to a Reuters poll that showed better days ahead for struggling emerging markets.
More than any other year, 2013 has shown how the glut of easy central bank money from rich-world countries has juiced stock markets in those places. But Chinese and Brazilian stocks have been in the red.
However, they are expected to recoup their losses next year and were ranked among the best performers for 2014 out of the 20 indexes covered in Thursday's quarterly Reuters poll of around 350 respondents.
On a regional basis, European stocks are expected to perform best in 2014. They are expected to gain, on average, 14 percent by the end of next year.
Given the sway over markets held by the U.S. Federal Reserve's monetary stimulus, it's no surprise that will be the biggest factor for stocks next year.
Most economists reckon the Fed will start trimming its monthly bond purchases that have sent hundreds of billions of dollars through stock markets by March next year.
The latest poll suggested there's a reasonable chance that might unsettle markets - almost one-in-five respondents forecast their respective markets will reach mid-2014 lower than their present level.
"The monetary policy of the various central banks will be the principal driver of market volatility during the year," said Gabriele Spinelli, head of securities at UBS in Italy.
"I expect a correction in the indices after the beginning of the year, in the expectation of an announcement (of the reduction) of the Fed's quantitative easing programme," he added.
Global equities slipped to a one-month low on Thursday after a provisional budget deal in Washington prompted speculation the Federal Reserve policymakers will start trimming its stimulus as early as next week.
Out of the more than 500 stock market forecasts for the end of 2014, 91 percent predicted gains from the December 11 close.
Although global stocks have risen steadily over the last two years, they are still around 8 percent off their late-2007 peak.
BULLS OUT IN FORCE
Equity analysts have a reputation for bullishness, although a look at their forecasts from this time last year suggests in many cases they haven't been bullish enough.
All but seven out of the 20 indexes are set to outperform this year compared with analysts' forecasts a year ago - and some by a huge margin.
Japan's Nikkei .N225 has gained nearly 50 percent this year after the Bank of Japan in April started a plan to double base money in two years to 270 trillion yen, far surpassing the median prediction.
And U.S. stocks have also performed far better than expected, with the S&P 500 .SPX outpacing last year's expectation by 15 percent.
However, they will not perform as well as they did in 2013. This year American stocks have gained 17 percent, but will have a more muted 2014 with gains of around 8 percent.
"The expected shift in Fed policy will be the primary headwind during the first half, but I expect stocks to recover after an initial sell-off, and work their way higher over the second half as the global economy continues to improve," said David Joy, chief market strategist at Ameriprise Financial in Boston.
Italian equities .FTMIB were expected to perform best of all, with a nearly 27 percent gain.
"We expect the bull market to continue in 2014, with the key driver being double-digit earnings growth. We detect no sign of over-optimism," said Robert Parkes, director of equity strategy at HSBC, on the outlook for European stocks.
However, there are some warning signs.
The 12-month forward price-to-earnings ratio for almost all developed market shares are trading above their 5- and 10-year averages, suggesting the rally in these markets could run out of steam next year.
By contrast, the 12-month PE ratio for the most emerging markets stocks are trading well below their 5- and 10-year averages.
Asian stocks should rise around 13 percent by end 2014, mainly led by China's Shanghai composite index .SSEC which is set to ascend 10 percent by mid-2014 and 18 percent by end 2014.
After being among the worst performers in 2013, Latin American stocks will gain, on an average, 11 percent, in 2014 with Brazil's Bovespa leading the way with an 18 percent gain.
However, Taiwan's Taiex .TWII ranks at the bottom of the Reuters poll for expected gains next year, at 4.9 percent.
"The Taiex is too expensive, but GDP growth remains low," said Beyond Asset Management's Michael On.
The same could be said of many other global markets.
"If the dog runs too far from the master, it eventually has to retreat," added On.