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In the previous strategy report, Aktie-Ansvar was “cautiously positive about the stock market despite high valuations.” Even then, cyclical stocks that would benefit when the recovery accelerated again were preferred.
“We were certainly right, but let’s be too careful in our assessment,” says Lars-Erik Lundgren, Aktie-Ansvar’s director of equity management, in the new report.
The cyclical oil / gas, commodities, nondurable goods and industrial sectors have increased by double-digit percentages since the last report. Technological stocks have also had a favorable evolution.
“Many advances in vaccines”
Instead, negative development has had three defensive sectors: telecommunications, commodities, and healthcare.
“Both the world index, the S&P 500 and the Eurostoxx 50 performed better than Sweden. That Europe is starting to grow is interesting, as many believe that Europe lacks the growth companies that have powered the US equity markets for many years. A trend or coincidence remains to be seen, but it is definitely worth watching, “Lundgren writes.
The explanation for the stock market rally is the many advances of the vaccine, a stock market rally like the one it has had would not have been possible without the “massive stimuli” that have been decided and implemented throughout the world.
More than the Marshall Plan
As an example, Lundgren cites the total of all incentives decided and implemented in the Eurozone. They amount to 30 percent of GDP in these countries, which is 23 times more money than the cost of the Marshall Plan after World War II.
However, even more stimulus is needed during the current year, even though it is clear that we are in a recovery phase, at the beginning of an economic cycle.
There are many speculative elements in the stock market right now, Lundgren writes, but there are also reasonably valued companies, despite the fact that OMX30 is currently trading 20 percent above its average for the past five years. And it’s important to keep valuation in mind, especially considering overall sentiment and the stock market rally.
We live in a positive climate that will not last forever. The stock market may not crash, but some parts of the market “definitely need a cool down.”
Rapid cooling provides a purchase mode
And that cooling can come quickly. Doing so can create a buying opportunity, especially for tech and growth companies that don’t just have “capitalized development costs on the balance sheet.”
Lundgren believes that we are already seeing the beginning of the end for huge stocks with weak data.
“The return of fiscal policy means a new era. There will be demand for real products and services and this will drive inflation and higher interest rates. I think the change is now and the market will find out in the spring,” he writes.
