Stockholm Stock Exchange saw a significant increase of over 3% last week, setting the stage for a strong finish to the year, according to von Eulers’ Chief Investment Officer Jon Arnell in a recent market update. Arnell expressed optimism about the current momentum and overall positive sentiment in the market, indicating potential for a favorable year-end performance.
The festive spirit in the markets seemed to have set in early with Donald Trump’s election victory, leading to an increased risk appetite that is expected to drive the markets further. Arnell emphasized that the path of least resistance is upwards for stock prices, the dollar, and interest rates, with Swedish stocks likely to follow suit in the upward trajectory.
On the bright side, Danske Bank’s senior strategist Maria Landeborn commented on the latest US job figures, stating that the creation of 227,000 jobs last month was precisely what the stock markets needed. This figure met expectations and alleviated concerns about the economy being either too strong or too weak. The likelihood of the Federal Reserve continuing to lower interest rates in the US has now increased, with the market pricing in nearly a 90% chance of a rate cut on December 18th. Landeborn predicted that the robust labor market combined with another rate cut would provide ongoing support to the stock market in the final weeks of the year.
While Arnell acknowledged the current positive sentiment, he also warned of looming uncertainties as we look towards 2025. He pointed out that American strength is already factored in, valuations are stretched, and there is a strong year behind us. While positive sentiment can sustain the market for a while, there needs to be underlying factors to support it.
Looking ahead to 2025, Landeborn suggested that investors should maintain a relatively high exposure to the US in their portfolios. She highlighted that American corporate earnings are expected to grow by 15% next year, double the rate of growth in Europe. The high proportion of growth and quality companies in the US market indicates structural growth in profits, whereas European earnings are more cyclical and volatile in nature.
In conclusion, the potential for higher returns in the US market, driven by strong corporate earnings and quality companies, makes it an attractive investment opportunity for the years to come. As investors navigate through the uncertainties of the market, maintaining a strategic focus on the US market could offer stability and growth in the long term.