From online investment news letter FN Arena News. By Greg Peel

Macquarie strategists are forecasting a 4.3% total return for the S&P/ASX 200 for the next twelve months, comprised of 0.1% capital return and 4.2% yield. Small Ordinaries score 6.3% on a 2.2% to 4.1% split.

Macquarie maintains that the outlook for global economic growth remains favourable, and that earnings per share growth forecasts are still around 18%. However, PE multiples for many sectors are still too high, says Macquarie, and with the risk of bond yields moving higher market returns may suffer as PE multiples contract.

Macquarie suggests sticking with those companies with international earnings exposure. It also predicts higher prices for bulk commodities, albeit not as high as thought earlier, and suggests domestic oligopolies are safe havens in the face of a domestic slowdown.

The strategists believe industrial stocks will enjoy earnings growth of 8.6% for the next twelve months and resource stocks 35%. Forecasts have drifted lower after a rough May. Traditional defensives have suffered earnings downgrades, Macquarie notes, with the exception of property trusts.