The FTSE 100 is forecast to fall from just over 7,000 now now to a trough of around 6,600 by the end of next year, according to Capital Economics.
"In other words, rises in global interest rates and the toll they will take on activity will result in the prices of gilts falling faster and UK equity prices falling further and for longer," said chief UK economist Paul Dales.
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This contrasts with predictions elsewhere, with Bank of America recently eyeing October as the potential end of the US bear market, while research by asset manager SEI Investment Management saying the S&P 500 should already be more than halfway through its bearish stage.
With the Bank of England raising rates five times in a row, Dales has been predicting that interest rates will peak of 3.00% by the middle of next year, from 1.25% now.
But he now thinks that a number of other central banks will raise interest rates faster and to higher levels to try and get on top of inflation, which will hit the price of UK government bonds, sending the yields higher.
"As a result of these global factors, we now think that 10-year gilt yields will rise from 2.35% currently to a peak of 3.00% by the end of this year rather than to 3.00% by the middle of next year," Dales wrote in a note to clients on Thursday afternoon.
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Investors are now expecting the BoE base rate to be hiked to a peak of around 3.25% next year, which is higher than the peak of 2.50% they were expecting a month ago and Capital Economics' forecast peak.
If the base rate rises in line with Dales' forecast, the Bank's SONIA term rates - the replacement for LIBOR - may converge close to 3.00% in the middle of 2023, he estimated.
"UK government bond 10-year yields have been driven higher by increases in real yields. The fall in break-even inflation rates implies that the markets believe higher interest rates will reduce inflation," Dales said.
UK government bond 10-year yields have been driven higher by increases in real yields. The fall in break-even inflation rates implies that the markets believe higher interest rates will reduce inflation.
"The possibility of faster rises in interest rates and even slower economic growth mean that corporate bond spreads will probably widen further over the next year."