The stage is set for new days in stock markets after a somewhat trite Thanksgiving week that offered little excitement – except for the fallout from the Altman bombshell that blew up Silicon Valley’s artificial intelligence crater.
Two of the three major US indexes have delivered double-digit returns so far this year (Nasdaq 36.2 percent!). Oslo also gave Bors a return of over ten percent. Per Mehul Stenersen is co-manager of several Eika funds. He believes the market has looked tense recently and believes this will also be the case in the future.
“We are seeing big price reactions to relatively small news, which are usually triggered by sensitive shareholders – and I don’t think there is anything different this time,” he says.
He sees one thing that could bring uncertainty to the stock market and one thing that could give a boost.
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There is now almost complete market agreement that interest rates have peaked. Interest rate cuts are priced in on an ongoing basis into next year. Long-term interest rates are down and US stocks are headed for their best month since last summer. But Stenersen reminds us that US Central Bank Governor Powell issued a “warning” about the possibility of keeping interest rates at a high level over a longer period if the stock market continues to show strength.
– I think this worries a lot of people, he says.
– If European industry returns faster than expected and Chinese authorities show their willingness to stimulate the economy, we will see a tighter energy market globally. Then we could see oil and gas prices rise which will contribute to higher inflation and uncertainty in central banks – and therefore uncertainty in stock markets. The official says Powell will not back down early.
Given today’s market climate, Stenersen and Ika prefer companies that have a strong market position, demonstrate cost discipline and have a sustainable debt ratio. The director highlights major technology companies such as Microsoft, Apple and Google.
– It has shrunk around the waist in a difficult time, and is equipped for further multiple expansion due to lower interest rates when demand among consumers returns, he says.
Cash on hold
According to Stenersen, today there are many large institutional investors who choose to hold a lot of cash. It is believed that this will make a positive contribution when the global macro economy stabilizes.
– After that we will see a longer period of net cash flow into stocks, which will contribute to a stable (positive) stock market again, he said.
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At Handelsbanken, the level of cash is where it’s at, explains chief strategist Halfdan Grangaard. When talking about free cash, this is often customer money that is deposited in, for example, money market funds that are easy to move.
Chief Strategist Halfdan Grangaard at Handelsbanken. (Photo: Liz Aserud/NTB)
Grangård expects normal excess returns in the stock market over the next three to six months. The normal additional return will be about 5-10 percent annualHe explains.
– Volatility in the stock market was not severe this year. It was high in the market interest rates. What gives us more confidence that there is more to be achieved in the stock market is that we believe volatility in the interest rate market may decline, he says.
Recently, Handelsbanken’s team has taken a slightly more defensive stance.
Dollar and yen
Handelsbanken is a neutral weighted stock. When the weight fell during the year – as stocks performed well – it rebalanced. More money is being put into commodities and hedge fund strategies.
Additionally, they have a weighting towards US stocks, which Grangard explains is a more defensive sector composition. At the same time, the dollar tends to rise when there is turmoil, which can give Norwegians a kind of “insurance” in case markets fall.
– In addition, we have an increase in Japanese stocks. It has to do with the fact that we like the Japanese economy a little more than other economies, but also the influence of the yen, says Grangard, who points out that the Japanese yen, like the dollar, has been considered a safe haven in times of turmoil.
The chief strategist also explains that European stocks are underweight, and sector-wide they love technology and health.
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