The darkest clouds over the markets have disappeared, which is why the neutral weight for stocks has gone up. However, Kivipelto advises stock investors to be cautious about geographical diversification.
We are overweight on emerging markets. We still have a neutral opinion on the US and Japanese stocks. Kaisa Kivipelto, Danske Bank senior strategist, says that the markets in Europe have fallen prey to overoptimism in some places.
The stock markets have risen as the worst energy crisis threats have faded away. It is predicted that Europe will not go through a recession. The energy crisis that is affecting the entire corporate sector has not yet been overcome, according to Kivipelto.
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, however, has been supported by a strong labor market and savings accumulated during the flu, although the high level of interest rates could have been expected to limit 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 risk premiums will increase in these riskier interest rate categories as growth slows from their current low levels, which is why there is very attractive interest rates available for emerging market loans and high-yield corporate bonds. If risk premiums go up, 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 a factor that determines the development of stock markets. It can lead to either weaker or stronger development than expected.
Interest rate hikes are curbing inflation rates, as central banks are curbing high inflation rates. The inflation has remained high despite the rate hikes. The interest rate hikes slow down the growth of the company, which directly affects corporate earnings.
Economic development will weaken if inflation does not ease and central banks continue to raise interest rates. Interest rate hikes are not needed in some cases, because inflation can decrease faster than expected. We are at a turning point, says Kivipelto.