The darkest clouds over the markets have disappeared, which is why the neutral weight for stocks has gone up. Kivipelto advises stock investors to be cautious about geographical diversification.
We are overweight on emerging markets. We have a neutral opinion on the US and Japanese stocks. Kaisa Kivipelto, Danske Bank's senior strategist, says that the markets in Europe have fallen prey to overoptimism in some places.
The stock markets have gone up as the worst energy crisis threats have faded away. It is now predicted that Europe will not go through a recession. Kivipelto notes that the energy crisis that is affecting the entire corporate sector has not yet been overcome.
The economic development in Europe has been better than feared due to a mild winter and low energy prices. Europe is not expected to experience strong economic growth, and there is a risk of an increase in energy prices. The US consumer, on the other hand, has been supported by the strong labor market and savings accumulated during the epidemic, although the high level of interest rates could have been expected to restrict economic growth, Kivipelto says.
Danske Bank maintains its weight in bond investments. The bank favors higher-quality investment grade corporate bonds, eurozone government bonds, and short-term money market investments.
There is a risk that the risk premiums will increase in these riskier interest rate categories as growth slows from their current, very low levels, which is why there are attractive interest rates available for emerging market loans and high-yield corporate bonds. If risk premiums rise, it will lead to a decline in value, says Kivipelto.
Money market investments and eurozone government bonds with short maturities are overweight due to their relatively low risk profile and moderate return potential. It can be said that especially money market investments have made a thundering comeback to the investor's toolkit, according to Kivipelto.
Inflation is one factor that determines the development of stock markets. It can lead to either weaker or stronger development than expected.
Central banks are curbing high inflation rates with interest rate hikes. The inflation has remained high despite the rate hikes. There is a correlation between interest rate hikes and economic growth, which affects corporate earnings.
Economic development will weaken if inflation does not ease and central banks raise interest rates. Interest rate hikes are not needed in the event of inflation decreasing faster than expected. Kivipelto says that we are at a turning point.