Equities have generally generated solid returns so far this year, and the gradual rollout of corona vaccines and the reopening of the global economy are continuing to support economic growth. That is good for equities and other risk assets.
However, equities look expensive in P/E terms – which is the price investors pay for one unit (USD, DKK, EUR, etc.) of earnings in a company – and the massive economic momentum from reopening looks set to fade in the not-too-distant future. That will limit the return potential from equities in the coming year, which is why we at Danske Bank have just a slight overweight in equities – in other words, we have slightly more equities in our portfolios than we expect to have in the long term.
Global reopening requires a delicate balancing act from investors
We are in the midst of an economic cycle on steroids and the right strategy at the moment is a cautious approach to equity markets. That's one of the highlights from Danske Bank’s new report, Quarterly House View, where our investment team focus on developments in the global economy, current investment opportunities and the risks and expected return from equities.