Nordea prefers shares, but there may be fluctuations soon – “All the same, investors should be prepared”

The stock’s return prospects are attractive, but the approaching mid-term elections in the United States may increase price volatility, he estimates Nordic rescuer Antti Saari in the bank’s weekly report.

“Investors should be prepared for slightly stronger than usual price movements around the elections in early November”, he writes.

Midterm elections will be held in the USA on November 3. According to Saari, hints related to changes in policy direction can sway rates in the short term, but they do not typically turn a bullish market into a bearish one.

Nordea keeps the shares overweight in its investment recommendations.

No shortage of worries

According to Saari, there has been no shortage of concerns in the market recently. In addition to the looming midterm elections, rising energy prices, rising interest rates and questions related to the profitability of artificial intelligence investments have kept investors on their toes for some time.

According to Saari, concerns are one of the reasons why the rise in share prices has not kept pace with the rapidly improving profit prospects.

“Investors’ healthy skepticism also effectively curbs excesses and substantially reduces the risk of bubbles,” he writes.

Fixed income investments are no match for stocks

According to Saari, the profit growth of companies has been exceptionally strong worldwide. Companies’ results are expected to improve this year by more than a third from last year.

Nordea prefers stocks, even though the rise in interest rates has improved the return prospects of bond investments. According to the bank, interest rates on government bonds in particular are at levels not seen in the last 15 years.

“However, even the increased interest rate is no match for stocks whose income prospects have improved along with the interest rates,” Saari writes.

Emerging markets are attractive

Among stock areas, Nordea prefers developing stock markets. According to Saari, they will benefit from artificial intelligence investments and the pick-up in semiconductor demand, which has already been reflected in a strong increase in profit growth forecasts. The good growth prospects of Asian and Latin American countries also support the profit prospects of developing markets.

Europe continues to be underweight in Nordea’s recommendations, as rising interest rates and rising energy costs will hit it the most among the equity regions, according to the bank.

“There are still opportunities in strategic industries, however, and we don’t think the outlook for Europe is bad either.”

In its international industry recommendations, Nordea overweights technology, finance and industry.

Nordea expects companies in the IT sector to benefit from artificial intelligence investments and sees room for growth in the sector’s valuation coefficients. According to the bank’s assessment, the financial sector is supported by economic growth and increased interest rates. The Industrial Products and Services Bank, on the other hand, expects to benefit from the pick-up in international investment demand.

Daily goods and the energy sector continue to be underweight in Nordea’s recommendations.