– The markets have become a bit blind – E24

Olav Chen sees no immediate threats to the global stock market, but is clear that the victory march will not last forever.

– This has been one of the best quarters ever for US and global stocks. The bull market has been without corrections for a long time. There have been five consecutive months of growth, says Chen, head of allocation and global interest at Storebrand, to E24.

Looking back on the quarter, many of the largest companies on the S&P 500 index on Wall Street have both met – and exceeded – expectations.

CNBC writes on Thursday that the index leaves behind its best first quarter since 2019. The broad S&P 500 index is up around 10 percent.

Both yesterday and today it closed at a record high.

– The companies have really delivered to the expectations that have been. In recent years, the companies have managed to defend their margins, despite expensive times and inflation. They have managed to make money so things are going well.

Violent rise

Chen sees – not very surprisingly – the computer chip company Nvidia as the big winner. The share is up over 83 percent in the 1st quarter, and again beat the market’s expectations when they presented their previous quarter’s figures. In March alone, the share has risen by more than 14 per cent.

And precisely the broad and sustained upswing in the markets should mean that some warning lights might start flashing, he believes. The issue now is whether to take profit or wait, says Chen.

– We are clearly overweight and have had a good first quarter. But we are not considering buying more in the future. Whether we should ride the wave a little more or sell is the question now. As of now, we have not taken any action.

Chen has previously said that one should be careful about declaring victory over inflation. In the USA, inflation has come down from well over 9 per cent to today’s levels of just over 3 per cent.

– The markets have become a bit blind as a consequence of this, says Chen, before quickly adding:

– We will look at the next rounds before we declare it dead. We are in a late phase in relation to the economic cycle. The tightness of unemployment remains at a record low in the United States. This is also the case in the eurozone and here in Norway. That makes it dangerous to declare victory, he asserts.

Chen is clear that he believes another recession is needed. But it does not seem to be imminent.

– We are in a “late mental” phase, but the economic cycle must be extended. If this lasts for another 18 months – until August 2025 – then I think it’s strange. But 18 months is a very long time in my world. In the short picture, we see no danger of recession in the USA. Rather, the growth prospects have increased markedly.

– Requires caution

But which sectors should you aim for in the 2nd quarter?

That’s the big thousand kroner question Chen gets from E24 this Maundy Thursday.

– We have no big “sector bets” right now. We are fairly evenly distributed. We are even overweight Japanese stocks and thus spread it wide. But from a directional point of view, I believe that sentiment is very high in the market. It requires some caution, he points out.

But at the same time, he is not very pessimistic.

– I do not believe in any major correction, but it is rare that you see what is being done now. Those of us who have been in the market for a while see seasonal patterns, have talked about “sell in May” – namely to take a little profit. Our most likely trade is more profit taking than stock right now.

That both Fed FedThe US Federal Reserve and ESB ESBThe European Central Bank seems to be heading towards rate cuts for the foreseeable future, won’t play much into the stock markets, Chen believes. He believes that most of it has already been priced in.

– The markets are happy that things are a little more predictable considering that the top has been reached. But this is long overdue. I don’t think there will be a series of cuts, and thus it probably won’t matter much.