The global equity rally will continue to stall unless economic growth picks up or additional monetary easing occurs, Canaccord Genuity Wealth Management global strategist Rob Jukes said, predicting low interest rates into 2016.

The firm’s “Policy Pressure Index”, which analyses indicators of inflationary pressures alongside signs that the economy is overheating or overleveraging, is firmly negative and falling. Monetary policy is not stimulatory enough, Canaccord said in a note.

“We expect [upcoming Bank of England governor] Mark Carney to establish a link between low rates and unemployment thresholds soon after taking the helm at the bank. The bottom line is that we are unlikely to see a rate hike before 2016,” the firm said.

“The Standard & Poor’s 500 has rallied nearly 140 per cent since the trough of 2009, but the last half of that recovery has been led by defensive stocks, which is most unusual,” it continued.

“To our minds, the extent to which the stock rally has continued has been less about growth and improving earnings fundamentals, and more about extraordinary monetary policy and the hunt for yield. It’s this dash up the risk curve in the pursuit of yield that has pushed the perceived lower risk dividend paying stocks to the fore. Indeed, the defensive rally became so pronounced that cyclical stocks twice became relatively oversold on our momentum indicator,” it said.

“As markets began to correct in mid-May, many started to re-appraise both the likely longevity and provenance of the now four-year old equity rally,” Canaccord continued.

“From here on in, it’s unlikely that the equity market will return to its previous state of relentless growth. Without the continued expansion of QE, which seems increasingly unlikely, equity markets will have to rely on growth to drive forwards. But the prospects for global growth are weak. Equity gains will prove much tougher,” it said.

The firm argued that it is not yet time to move into underperforming cyclical stocks. There seems to be little case for doing so without far higher bond yields or an acceleration of economic growth, it said.

“So if we are right, and defensive yield plays continue to outperform, the recent market correction may be an opportunity to look again at some of those (now not so expensive) dividend payers,” it added.