According to the expert, investors are facing a return to the surface of the earth

In the stock market there may now be a return to the surface of the earth, and the fiercest expectations of a rise may fade a little. Signs of that were seen when Wall Street experienced its second worst day of decline this year on Wednesday.

On Thursday, the stock markets also glowed red all over Europe.

Investors were disappointed when the Fed, which cut interest rates on Wednesday, said it would slow down its pace of interest rate cuts in the future. Next year, instead of the expected four bills, there may be only two interest rate cuts.

Up until now, it has been the interest rate cuts and expectations about them that have given momentum to the stock markets.

OP’s chief financial management strategist Lippo Suominen believes that investors now face a return to the surface of the earth, even if the big picture of the stock market does not change.

“I don’t think the market will turn down. The good trend will probably continue, but the strongest rise in the stock markets may now calm down. Investors have to raise their expectations,” says Suominen.

with According to Suominen, if the rise calms down a bit, it would be a good thing.

The reason for the Fed’s interest rate reduction rate is the good bet of the US economy. In the United States, the economy has grown at a good pace and the prospects for next year are also bright. The companies’ profit growth has also been strong, and forecasts promise that the profit growth will continue.

When the economy grows, there is no longer a need for interest rate cuts to the same extent.

“Investors were now brought back to earth that you will either get a good economy or interest bills, but not both at the same time anymore. A good economy is usually always a better option,” Suominen reminds.

In itself, this should not have come as a surprise to investors, but according to Suominen, the central bank, the Fed, has partly fueled expectations of a rapid pace of interest rate cuts.

Why stocks fell so sharply? For example, the Nasdaq index slipped by 3.6 percent and the S&P 500 index by 2.9 percent on Wednesday. Dayfalls bigger than this have been seen in the summer this year.

Suominen believes that behind the wave of sales of stocks is the desire of investors to secure their profits just in case, when there is a strong continuous rise behind it. In August, the stock markets saw a mini-crash, but since then the stock market in the United States has risen by almost 20 percent.

“It was above all about the change in atmosphere, when the overbearing trust evaporated”, Suominen assesses.

“In order for the stock markets to turn to a more permanent decline, there would have to be bad news about the economy and the earnings of companies, and that doesn’t seem likely,” says Suominen.

Neither Aktia’s investment director Samu Lang I don’t think that it would be a bigger change in the market trend and a more permanent reversal to the price decline.

However, according to him, the big change happened in how the stock market will move in the future.

“In the future, exchange rate development will depend more on the real economy and the profit growth of companies than before, and no longer on the Fed’s interest rate policy,” says Lang.

According to Lang, the Fed made it very clear that the interest rate cure has been removed. That’s how good the US economy is doing.

According to Lang, this was a surprise for investors, who were expecting a message from the central bank about the continuation of interest rate cuts. This is why the rate drop was so drastic.

Stocks according to him, they still remain attractive options, even if they are no longer affordable.

Lang believes that the technology companies leading the US market will still hold their ground because their profit growth is still strong. At the same time, however, he believes that the base for the market’s rise will expand, meaning that the price rise is not solely dependent on technology companies.

Lang anticipates that investors will seek more other options from different industries and markets in the future. For example, cyclical, i.e. cyclically sensitive companies may be of more interest in the future.

According to Lang, even markets that previously lagged behind can start to attract investors. In Europe, for example, shares are priced more favorably.

Shares on the Helsinki Stock Exchange are also cheap, but according to Lang, that is not enough.

“The revival of the Helsinki Stock Exchange would require foreign investors to take an interest in it,” says Lang.

How about can Donald Trump’s assuming the presidency in January will still revolutionize the market?

“The Trump rally has already been seen and is evaporating from the stock market. Rather, there may be a Trump hangover ahead, when the promised changes won’t happen quickly,” predicts Lang.