A few months can really make a difference in the financial markets – in recent months for the better.
Market sentiment was bleak in August
The US-China trade war was escalating and signs of weakness in the global economy were becoming more pronounced, while yields hit new lows in Europe and equity prices fell.
Optimism has now gained a significantly firmer footing
Political risk has eased following US-China negotiations on a partial deal in the trade dispute, while a number of positive economic key figures and more accommodative monetary policies from the central banks have resulted in a slightly brighter outlook. This has sent both yields and equity prices higher.
Overweight maintained in equities
Recent trends generally support Danske Bank’s expectation that equities still have a reasonable return potential in the coming year. Therefore we are maintaining a slight overweight in equities in our portfolios and a matching underweight in bonds – and we see the most attractive return potential in US equities.
Upswing still on track
Equities are benefiting from the still ongoing upswing, which in the US has lasted more than 10 years, making it the longest upswing since World War 2. “However, we are in the late phase of the upswing, and the years of highest growth are now behind us. Nevertheless, in our view the upswing still has some time to run before the economy turns south – at least 12 months and potentially longer, which provides a foundation for further equity price rises in 2020,” says Danske Bank’s chief strategist Henrik Drusebjerg.