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Even compared to the MSCI World Index, Danish stocks are on fire. The world index is up 3.5 percent. These figures also make it clear that Stockholm is one of the best stock exchanges in the world so far this year.
Danske Bank investment strategist in Copenhagen Lars Skovgaard Andersen explains on the bank’s Danish website how clients should relate to the sad reality: having only a limited number of Danish stocks in the portfolio, he urges, adding that in this time is also not the time to buy the most expensive growth stocks.
Instead, Danske Bank continues to focus on IT stocks.
“No idyll”
The positive development in the markets at the moment is not just an idyll, says Lars Skovgaard Andersen. Instead, the post-pandemic period has been characterized by “violent movements between different sectors and categories of stocks,” he writes on the website.
This means some days of price spikes in tech stocks, while other days are mostly cyclical stocks, such as finance and industry.
“Some days investors jump into growth stocks, other days they price stocks,” he says.
At the same time, investors are nervous because the fluctuations in the market are large and, in addition, there are the rising interest rates that create more “waves”. In general, it can be said that the evolution of the stock markets “at the moment seems schizophrenic,” he says.
“Heavy days for C20”
Lars Skovgaard Andersen also claims that the Danish large-cap C20 index has had some really tough days, but not only Denmark has had some tough days, this also applies to the US.
– In Denmark and the US, we find many structural growth companies in the health and technology sectors, he says, adding that these are companies that have strong underlying growth and are less dependent on the state of the global economy. .
Last year, there was great demand for these stocks, but the question is where are we focusing right now, he asks rhetorically.
“Generally well established”
Danske Bank is currently positioning itself towards a more self-sustaining global economy, benefiting more cyclical sectors such as industry, commodities and finance. According to Lars Skoovgard Andersen, there are stocks that tend to perform better in “economic rallies.”
But Danske still believes that “structural growth stocks” should always be part of the portfolio. At this time, Lars Skoovgard Andersen has invested in the IT sector, which was the big winner last year. Tech companies are generally well established and have large cash registers. Own share buybacks will provide support to the sector, believes Danske Bank, which at the same time expects companies in all sectors to increase their investments in IT when the global economy recovers.
On the other hand, sentiment from Danish stocks remains cautious as Danske sees that some of what raised Danish stocks in 2020 may hamper them this year. Thus, healthcare was recently downgraded to an underweight in the bank’s portfolios, while healthcare is by far the largest sector in the Danish large-cap C25 index.
“Exciting in the long run”
Danske also refrains from investing in the more expensive engineering stocks, as Skoovgard Andersen fears investors are likely to have to pay dearly for the expected high growth in the sector.
Caution extends to the full range of expensive growth stocks, such as e-commerce, electric cars, biotech, or various green investments. The potential for these is “incredibly exciting in the long term,” but Danske Bank is cautious in the short term.
