“The main picture is that we’ve had some bad days driven by the turmoil, but over the slightly longer term, I think the outlook is good enough to have more shares in the portfolio than usual,” says chief strategist Eric Bruce at Nordea.
Nordea maintains its recommendation to have a predominance of stocks in the investment portfolio.
The main reason is that despite some headwinds in the form of weak growth in China, the gas crisis in Europe, debt ceiling problems in the United States and central banks that will withdraw stimulus, there are prospects for good growth in the economy, says chief strategist Eric Bruce at Nordea. , to E24.
With economic growth also comes increased corporate profits, which is what drives our positive view, he adds.
In recent weeks, concerns about Chinese housing giant Evergrande, the upcoming rise in interest rates, and concerns over the dispute over the US debt ceiling have led to marked volatility and turmoil in stock markets.
Bruce believes a lot of this will be resolved in the future.
The Evergrande issue will be resolved and the Chinese economy will recover again. We also think that there will be some sort of solution to the chaos in Washington, and then everything will be in place for good economic growth in the future.
He notes that the recovery in the global economy faced a temporary setback with the virus boom, but is now successful.
Turbulence is always at its peak up front, because uncertainty is the worst the market knows. Therefore, stocks usually perform worse in the lead-up to crises, and it is difficult to imagine a new crisis now.
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Increased costs for some, increased revenue for others
The recent high rates of inflation in both the US and Europe are also a concern.
– Bruce points out that there is a lot of focus on the fact that some industries will increase costs, but this also means that some companies will increase revenue.
He points out that higher energy prices are behind much of the general increase in prices, but also provide an increase in income, for example for some energy companies on the Oslo Stock Exchange.
Bruce also believes that some of those experiencing increased costs can offset them by passing them on to higher prices for consumers, due to strong demand.
I think the results are beyond expectations
When quarterly reports for the third quarter in the US begin in earnest soon, Nordea expects positive surprises in that earnings growth exceeds analyst estimates.
Analysts’ estimates for companies at S&P show roughly flat growth from the second quarter to the third, and he appears to be very cautious. This has been the case in recent quarters, which is an important reason why the markets have advanced so far. Bruce says the development was much better than feared.
How long do you think the market will be turbulent?
The main picture is that we’ve had some bad days driven by the turmoil, but over the slightly longer term, say 3-6 months, I think the outlook is good enough to have a bit more shares in the portfolio than usual.
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Good profit prospects for IT
Nordea believes that the recovery in the industrial sector will slow somewhat after the strong recovery that has taken place, while the IT sector is expected to see stronger growth in the coming time.
The IT sector is a generally well-functioning sector, which I think has good earnings momentum now, with continued looming problems and strong demand for many IT products. Bruce says they also have stronger pricing power and can handle slightly higher interest rates.
Funding continues to be overweight, as Nordea believes the sector could benefit from a certain rise in interest rates. The opposite is the case for Supply and Real Estate, which is still underweight.
As for the energy sector, Nordea has a neutral weight, but Bruce still believes one can see good profits from the Norwegian energy companies.
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