Significant volatility continues in the financial and commodity markets. After hitting $130 last week, oil prices fell nearly 7 percent on Tuesday afternoon to below $100 a barrel.
This contributed to a noticeable decline in the Oslo Stock Exchange, where the main index fell by 1.57 percent. At most, the exchange fell more than 2%.
Investor Silje Landevåg received more than NOK 100 million when she sold herself on Get Inspired in December 2020, and the money gained a foothold in the stock and fixed income markets. At the end of 2020, her company had shares, funds and bonds on the market with a market value of close to NOK 91 million.
With the fixed income market rising, valuable companies have historically done better than growing stocks. So I’ve adjusted the portfolio further in this direction, says Landevåg.
Landevåg says it has a long-term strategy, and that a “reasonable share” is being placed in the fixed income market.
– I have been an investor for a long time, so I also gained some experience before. Autumn in March 2020 was much bigger. The investor says I stick with the strategy, and I believe in big global growth in 2022.
The stock market was hit by stock market giants Equinor, Aker BP and Norsk Hydro, which all fell by between one and five percent on Tuesday afternoon. The companies have gained momentum as a result of the recent rise in raw material prices.
– Commodity prices are now slightly lower, which is particularly unfavorable for the Oslo Stock Exchange. At the same time, it reduces inflation expectations, but then we see that as a result, the real interest rate is raised. This is not suitable for stock growth. Thus, we see that both oil and energy stocks and a number of growth stocks are down on the Oslo Stock Exchange today, says equity strategist Paul Harper at DNB.
A large number of high-growth companies on the Oslo Stock Exchange also fell sharply on Tuesday afternoon.
- Kahut’s stock fell 3 percent
- Adventa down six percent
- Neil fell seven percent
– Having been a good place to be lately, the Oslo Stock Exchange is less favorable today, says Harper.
Harper expects a more moderate return in 2022, after the benchmark is up 23.3 percent in 2021.
The Oslo Stock Exchange is likely to perform relatively better than other stock exchanges due to exposure to raw materials. But the background of weak growth and higher interest rates isn’t positive for stocks overall, so one probably wouldn’t expect a huge return this year, he says.
– About to go crazy
Markets have fluctuated more than usual lately, with many citing monetary policy normalization as one of the main reasons.
Since the financial crisis, the Federal Reserve (the Federal Reserve) has had to support government bonds and mortgage bonds to varying degrees with the aim of helping the economy. This contributed to an increase in asset prices and reduced volatility in the financial markets. Recently, support purchases, officially called quantitative easing, were completely scrapped.
I think he was on the verge of madness, especially given how slow central banks have been to roll back the measures. We’re talking about inflation figures of seven to eight percent, which can go as high as nine percent in the United States.
The European Central Bank (ECB) is still buying support. The European Central Bank recently announced that support for securities purchases will consist of net purchases of 40 billion euros in April, 30 billion euros in May and 20 billion euros in June. If market conditions permit, the support purchase program will be considered completed in the third quarter of this year. The Ukraine war is the great joker.
In the euro area, inflation is somewhat lower, but can quickly reach the same levels in the future, then it is discussed whether the European Central Bank or the Federal Reserve should raise the interest rate by ten or 25 basis points from the interest rate zero current. It’s unbelievable that we came here, and that central banks are getting away with it. They painted themselves in the corner.
Everyone is looking at the Federal Reserve
The Fed will present its rate decision on Wednesday evening, Norwegian time. The Fed is expected to raise the interest rate to 0.25 percentage point from the current zero. After that, interest rate increases are expected to come like pearls on a string in 2022 and 2023 to beat accelerating inflation.
However, there are also a number of other signals that market participants will follow. Fed members will present new estimates of the number of interest rate increases this year, as well as the next two years and for the long term. The market is now pricing in a total of seven Fed rate increases this year. At the same time, the market will follow the signals that the Federal Reserve will start reducing the balance of the central bank.
The Fed will also provide estimates for unemployment, economic growth, and inflation. Chen believes that the market will pay more close attention to how the Federal Reserve assesses the war and its impact on higher commodity prices. He himself does not believe that central banks will place much emphasis on the rising inflation caused by the Ukraine war, because it is caused by a supply shock rather than an increase in demand.
— But if price increases spill over into wage expectations, central banks must act on them, says Chen.
Chen also sees other signs that the highest inflation rate in more than 40 years in the world’s most important economy may be an even bigger problem.
– We see trends of deglobalization. There will be a growing decoupling between the United States and China, which will mean reduced global trade and increased costs. And if you really want to draw the devil on the wall, a green shift will also be able to push inflationary pressures higher. Chen says it has the potential to drive up costs, and the need to invest significantly.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.
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