OP believes that the outlook for the stock market has improved

Fears from the rapid cooling of the economy have dissipated, and the outlook for the stock market is now generally good. This is the opinion of the chief strategist of OP asset management Lippo Suominen in the bank’s announcement.

The bank’s view of the outlook for the stock market has now become more positive than before. It has changed its investment outlook by making stocks overweight in its investment portfolio.

According to Suominen, the reason for this is primarily the interest rate cuts initiated by the central banks.

“The jump of central banks from inflation hawks to supporters of economic growth is significant news for the stock market,” says Suominen in the press release.

Interest bills mean that central banks are now trying to secure the continuation of economic growth, while they previously focused on curbing inflation.

An environment in which the economy grows moderately and monetary policy eases is supportive for stocks, Suominen says in the press release.

The bank raised the shares to overweight at the end of September. Previously, the shares were in the neutral weight, to which it moved them in August. At that time, it saw more risks in the stock market and economy after a strong start to the year.

Transferring shares to overweight means that the share of shares in the investment portfolio has been increased so that their share is greater than that of fixed income investments. It means taking bigger risks.

In the neutral weight, the share of stocks and fixed income investments was equal.

In the stock market OP still believes in a good US bet. It also says it will seek additional returns from US small and medium-sized companies, whose shares are not as expensive in terms of valuation as, for example, many tech giants.

In addition to increasing the share weight, OP now also sees changes in the interest rate market. In its fixed-income portfolio, it overweighted corporate bonds and debt securities from developing countries.

“In fixed-income investments, investments with credit risk are now the clearest beneficiaries,” Suominen says in the announcement.

Their income is supported by both the general drop in interest rates and the narrowing of credit margins. Credit margins narrow when the economic outlook stabilizes and default risks decrease.