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Last year’s price increase was about 14 percent, measured in dollars, on a global stock index. Vaccines contributed heavily to the positive outcome, as did several large stimulus packages, primarily in the US and the euro zone. The trade agreement between the EU and the UK is also on a positive scale. Negative are the prolonged closings towards the end of the year.
But as the manufacturing industry is surprisingly positive today, it will appear as more and more reports come out.
“Relatively powerful recovery”
“The big picture indicates that investors are pricing in a relatively strong recovery in demand in 2021. Markets for risk assets continued to strengthen around the turn of the year, although gains were more subdued than in late fall,” the Bank writes from Åland.
In the United States, a major change has occurred as Democrats not only control the House of Representatives, but also win a majority in the Senate. This means that the new president will have significantly greater opportunities to pursue his policies, which heralds a more expansionary fiscal policy, in addition to the Fed’s already expansionary monetary policy.
“Slightly overbought”
In terms of allocation, the Bank of Åland still considers the stock market to be “somewhat overbought”.
“Rising prices and a valuation at the top open up more volatility, but without active risk taking it is difficult to find a return,” writes the bank, which maintains its overweight position in equities. overweight, based on sector rotation from “growth” to “value”.
The Nordic region is overweight due to its cyclical nature, which benefits from the economic recovery. Europe is overweight due to a number of signs of recovery, albeit from low levels.
Both the US and emerging markets are underweight. In the US, rising stock prices have raised the valuation.
In emerging markets, the recovery is “cautious”, while the dollar is weak and the rise in commodity prices is generally positive. But there is still a lot of uncertainty while economic activity is low.
