All three major indices in the United States begin the week with red numbers. Fear of increased spread of the delta variant seems to be the most important factor, according to the manager.
While the Norwegian stock market ended with the biggest decline of the year, things in the US are not much better. On the first trading day of the week, the stock indices in New York look like this. 17.30:
- Dow Jones: 2.30 percent share
- Nasdaq: down 1.09 percent
- S&P 500: down 1.64 percent
There are concerns about the increase in the number of cases combined with rising inflation that is driving the decline, according to CNBC.
The number of covid cases in the United States has increased in the last month, mainly due to the delta variant that spreads among the unvaccinated. In addition, the number of cases of infection is also increasing among the vaccinated.
Monday therefore appears to be a continuation of the decline on Friday, when all three U.S. indices ended in decline. The Dow Jones and Nasdaq suffered the biggest loss of one day in a month on Friday.
At the same time, yields on ten-year US government bonds, often called the most important ten-year high in the world, rose to 1.21 shortly after opening in the US. This is the lowest level since February 16, 2021.
– There is no crisis
Storebrand’s Head of Allocation and Global Interest Rates, Olav Chen, does not believe that fear of inflation will drive the decline in stock markets. He believes there is a fear of increased spread of the delta virus, which is the main single factor.
– The fear of inflation is likely to diminish. I mean it’s present, but that it took a while before it flared up again this fall. Interest rates have not gone up, as they would have been fears of inflation, Chen told E24.
Yields on ten-year U.S. government bonds, often cited as the world’s top yields, have fallen from 1.29 to 1.21 percent so far Monday.
At the same time, Chen, who is not particularly concerned about the broad decline in equities, points out that the figures need to be seen in perspective.
– The global stock market was in practice at very high levels before it started to fall, at the same time as there have been a few clouds on the horizon. Then it takes a while before things turn around a bit.
The shares are still at very high levels, Chen points out.
– We’re back to last week’s levels. There is no crisis.
Believe in further rise
At the moment, the reopening of England, which is coming despite high infection rates, is what everyone is seeing, according to the portfolio manager. How the reopening degenerates will affect the shares. If it does not go well, you can get a big correction, Chen believes.
As it stands now, Chen does not believe the decline is the beginning of a major correction, which he defines as a fall of 10 percent or more.
On the other hand, he still believes in a rise, both worldwide and in Norway. However, a strong growth like that of last year is not likely in the eyes of the manager. Chen has the most confidence in Norwegian stocks.
“We believe in a 5 to 7 percent rise over the next 3 to 12 months, which is the expected normal return for equities, for the global stock market, while we believe in a higher rise in Norway,” Chen told E24.