Nordea: The appetite for risk is back

In their weekly report, analysts Erik Bruce and Joachim Bernhardsen in Nordea write that the stock market has continued its strong development from the beginning of the month, and that there is a growing appetite for risk among investors.

The analysts point out, among other things, that the fear index has fallen to its lowest level since before the pandemic, and that it appears that investors have faith in calmer waters ahead. In addition, Oslo Børs has done well despite a drop in oil prices.

More stable

“There are no obvious triggers behind the good sentiment in the stock market this week. And perhaps it is the absence of negative news that is now lifting the market”, write Bruce and Bernhardsen.

They point out that signals from the US central bank the Federal Reserve and inflation figures from the US indicate that we are now entering a more stable period for interest rates. They also indicate that the geopolitical picture is more stable, which the stock market likes.

This is reflected in the so-called fear index, VIX.

“The index, which reflects expected volatility (swings) in the US stock market over the next 30 days, has fallen to levels last seen before the pandemic. It must be called a milestone.”

However, they point out that expectations of a calm period can lead to a greater fall if there are negative surprises.

This happens until the week

Next week there will be a number of key figures. There are inflation figures for November from the eurozone and the important ISM industrial indicator from the USA. The Fed’s favorite measure of inflation, October core PCE, is also due.

“The question is whether it also shows a moderate monthly growth of 0.2 per cent as the regular consumer price index (CPI) showed. According to the ISM index, the outlook for American industry has improved over the past few months. However, last month’s figures fell back. The figure on Friday could potentially confirm whether the fall last month was noise or whether the outlook has actually weakened again this autumn,” the analysts write in the weekly report.

They also write about the oil price, the markets in the USA and macro in the eurozone. Read the full report here.