Wednesday , November 25 2020

– 2021 can be really good – E24

Vaccine optimism has accelerated stock markets around the world. Here, at home, the stock exchange restored the loss of the crown for almost a year. But growth also means the most expensive stocks in decades, according to stock strategist Paul Harper.

Chief strategist Christian Brech of Danske Bank

Cicilie S. Andersen / E24

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– We had a very good November, – says chief strategist Christian Lee in Danske Bank to E24.

The Oslo Stock Exchange has now roughly returned to pre-crisis levels, after a sharp rise recently.

The main index is about 908 points on Friday, compared to 636 points of the lowest level in March. In November, the Oslo Stock Exchange gained momentum, having increased so far by 12 percent.

The image of stock market growth is also included elsewhere. This month, the European market grew by 14 percent, while growth in the US is about 10 percent.

“It’s time for the best month for European stocks,” Lee said.

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Vaccine optimism

Equity strategist Paul Harper at DNB Markets points to news about vaccines and the US election as two important drivers of stock growth.

– It was a very strong acquisition. It is not easy to see that we are still in a partially closed situation in the economy. But the stock market is ready to review it when news of the vaccine emerges, Harper said.

“The rise we’ve seen lately has been largely caused by the vaccine, plus one is in line with the US election results,” he said.

Equity strategist Paul Harper in the DNB market


Lee says the vaccine process “opens the beginning of the end” for the pandemic.

Several pharmaceutical companies have reported advances in the development of effective coronavirus vaccines.

On Friday, Pfizer and Biontech applied for urgent approval of their crown vaccine from the US FDA.

Moderna also reported an effective vaccine.

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– 2021 can be really good

At the same time as positive news about vaccines collides, both the United States and Europe are in a wave of infections, and several European countries have reintroduced restrictions to contain the infection. This again affects economic activity.

“The main question we see is how patient investors will be to stay optimistic in the face of what can be a difficult period of tight restrictions,” Lee said.

“Not just in Europe, but in the United States, and with weaker economic performance than we’ve seen in recent months,” he said.

Danske Bank expects the eurozone economy to shrink again in the fourth quarter. Lee believes that the wave of infections in the United States increases the risk of restrictions there, which may “force the economy to its knees.”

– We are moderately optimistic in the short term, given that we will have weaker economic development, but at the same time we see that the potential for 2021 can be really good, he said.

The reason is expectations about the distribution of the vaccine.

“Because then not only are we getting a vaccine rebound in the services sector, which has ripple effects on the entire world economy, but we also have very good conditions for strong corporate profits,” Lee said.

He notes that next year the return on global stocks will increase by 30 percent, and central banks and public authorities will continue to stimulate the economy.

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The highest price since 2001

The growth of the stock market here at home took place, even though the company’s profits fell. This means that stock pricing, measured by the ratio between the share price and the result of companies – the P / E ratio, has increased significantly.

According to Harper, P / E-based prices are higher than at any time during the period 2001-2019.

– Multiple indicators of the index increased significantly in 2020. During the year, the P / E ratio went from 14.5 to slightly more than 18. It is assumed that profits will return over time.

– Maybe it is, but the question is how soon it will return. We need enough help from the price of oil if we want to grow into the prices we have now, he says.

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