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It is in the bank’s December market letter that Skandia asserts that extensive stimulus from central banks and world governments is the main explanation for the double-digit rise in stock indices this year.
“This has led to a wave of liquidity in the markets and has made already low interest rates even lower, which in turn promotes acceptance of higher equity valuations,” writes Skandia.
But it is precisely the high valuations of stocks that are the central theme for 2021, says Skandia. The P / E ratio for the world index is currently 20, which can be compared to 16.5 a year ago. It is true that it is high American values that raise the average level on the world index. But even if you exclude the United States, the values are high.
“Therefore, we are entering 2021 with higher stock prices and significantly higher valuations than a year ago. So even if we, like most analysts, expect a sharp increase in the company’s growth and earnings next year, it should be priced at today’s stock prices, “Skandia writes.
However, this does not mean that the stock market will not rise next year, Skandia says, but the stable clue is that the stock market will be higher than today in a year.
“There are many reasons to be excited about 2021. Hopefully we will accelerate vaccines, which will roll back the pandemic and pave the way for a lasting recovery. But for the stock market, high equity valuations dampen our enthusiasm. We believe that the stock market has more to offer in 2021, but we believe there is a basis for moderate expectations, ”concludes Skandia.
