Nordea strategists believe in value stocks next year – E24

– Given the magnitude of the economic shock that hit us in March, it is somewhat surprising that markets have done so well, write Bruce and Bernhardsen in a weekly report.

In March, the MSCI ACWI broad world index fell more than 30 percent at its worst. However, during the year, global stock markets have recovered from the March slide and the index is expected to rise by around 15% by the end of the year.

– Market valuation has increased in most sectors. Lower interest rates are a major reason for this. When the alternative performance of fixed income securities weakens, one is willing to pay more for the returns in the stock market, they write.

Growth share year

After the stock market crash in March, growth stocks have had the biggest rebound. So far this year, the growth-driven information technology sector has grown more than 40%.

– Steep falls in interest rates and other stimulus from central banks together with countless rescue packages have contributed. At the same time, it is no accident that the information technology industry has done well. Several sectors, with IT at the forefront, have increased their profits as the pandemic has led to increased demand for their goods and services, Nordea strategists write.

Believe in value recovery

Next year, it’s time to get the value stocks back, believe Bruce and Bernhardsen.

– There are good arguments for lower-priced companies to do better. Interest rates may go up, supporting value stocks rather than growth stocks, they write in the report.

In particular, they are pushing for the raw materials and industrial sectors to be the winners next year.

– These sectors have already been strong performers, but as fiscal stimulus shifts toward more investment in infrastructure, we believe there is room for continued strong development, they write.

But the prediction depends on the historically low level of interest rates.

– How strong the recovery will be and how much interest rates will rise will likely determine whether the initiated shift from growth stocks to value stocks continues into next year, write Bruce and Bernhardsen.